Prabhudas Lilladher recommended accumulate rating on Hexaware Technologies with a target price of Rs 384 in its research report dated January 31, 2019.
Prabhudas Lilladher's research report on Hexaware Technologies
Hexaware delivered weak performance during Q4CY18 with miss on margins and PAT. Revenues came inline with our estimates. Management has given revenue (organic) growth guidance of 12-14% YoY for CY2019 which is inline with our estimates. However, guidance on margins is muted as it expects its CC EBITDA growth to be in-line with CY19 CC revenue growth. We note that this will led to flat margins YoY for CY2019. We now model USD revenue growth assumptions to 13.1/13.8% for CY2019/CY2020E (vs 13.1%/13.4% modelled earlier). We note that select Midcap peers are likely to outpace Hexaware revenue momentum in FY19. Peers like Mindtree /LT Infotech/ NIIT Tech are poised to deliver 15/16/15% USD revenue growth in FY20E respectively in our view. Our USD/INR assumptions are at Rs72/72.5 for CY2019/CY2020E. Led by tepid performance on margins in Q4CY2018 and softer guidance we now model EBITDA Margins at 16.5%/17.0% for CY2019/CY2020E (vs 17.3/17.8% modelled earlier). We downgraded our EPS estimates by 4.8%/1.5% to Rs22/26 per share for CY2019/CY2020E.
Outlook
Hexaware is currently trading at 14x CY19E EPS and 13x June 20E EPS. We maintain our rating Accumulate. We trim our TP by 10.7% to Rs384 (16x June20E EPS).
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