HDFC Securities recommended reduce rating on Hexaware Technologies with a target price of Rs 360 in its research report dated July 29, 2020.
HDFC Securities' research report on Hexaware Technologies
We maintain REDUCE on Hexaware, following a better-than-expected 2Q, offset by a relatively slower recovery path. Key positives include the following: (1) BFS vertical strength supported by a recovery in large BFS account (mortgage); (2) continued strength in the Professional Services vertical, and market-share led gains in cloud transformation (launch of ‘Amaze’ solution). Key risks/negatives include the following: (1) weakness in Travel & Transportation and Manufacturing & Consumer verticals (~24% of rev) expected to continue, (2) lower discretionary spend and supply-side factors can continue to impact Application Transformation Management service-line and BPS service-line respectively. While business dynamics exhibit protracted recovery, stock price performance will trail developments around the delisting proposal.
Outlook
The shareholder approval for delisting (10-Aug) and the subsequent developments on offer price are likely to drive the near-term stock performance. Our target price of Rs 360, 14x Jun-22E EPS, follows ~3% EPS estimate increase for CY21E.
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