hexaware technologies ltd - q3fy11 result update

8/3/2019 Hexaware Technologies Ltd - Q3FY11 Result Update

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Wealth Research, Unicon Financial Intermediaries. Pvt Ltd.

Email: [email protected]

NG TERM INVESTMENT CALL

BUY21 October 2011

Company Report | Q3FY11 Result Update

Strong performance in the quarter, with improved revenue

guidance

Hexaware Technologies Ltd (HTL) posted great results for the quarter,

with strong revenue growth and an increase in EBITDA margins despite

an increase in onsite wages.

Strong Volume growth: HTL posted robust volume growth of 9.2%

sequentially and offshore revenue mix went up 300 bps QoQ to 46.3%

HTL reported top-line and bottom-line numbers which were above our

quarterly estimates. Revenue at INR 3.6 bn was up 30% and 9.5% on a

YoY and a QoQ basis respectively. EBITDA for the quarter stood at INR

686 mn, up 34.2% QoQ and 186% YoY. PAT stood at 646 mn up 54% YoY.

PAT margin increased by 274 bps YoY and stood at 17.7%. HTL saw an

increase in realization for the quarter which contributed to a 1.15%

increase in revenue in USD terms. Depreciation of INR added 105 bps to

the top line for the quarter. Increase in wages in the quarter impacted the

gross margin by -75 bps this quarter.

New deals in the quarter: HTL added12 new clients in the quarter across

all major focus areas of the company. The quarter saw 3 new clients

added to the Travel & Transportation Vertical and 4 new clients added to

the BFSI vertical. In the Enterprise Solutions space 5 clients were added, 1

client added in Quality Assurance & Testing Services (QATS), 2 clients in

Business Intelligence & Business Analytics (BI/ BA) horizontal, and 1

client in Business Process Outsourcing (BPO) space. The share of revenue

contributed by the new clients stood at 6.5%

Performance across Industry Verticals & Geographies: Across the

verticals for the quarter, the Emerging Segments contributed to 42.4% of

revenue and BFSI and Travel & Transportation contributed to 34.4% and23.2% of the revenue respectively. Americas contributed to 64.7% of the

revenue for the quarter as compared to Europe and Asia Pacific which

contributed to 28.4% and 6.9% of the revenue respectively.

Improved Guidance by the management: The management is confident

of strong revenue growth for the quarters moving ahead. They have

given an improved annual USD revenue guidance with a 32% YoY

growth. The company expects broad base growth moving forward and

has been successful in growing large accounts over the last few quarters.

The company has planned a capex of INR 115 mn for Q4FY11. The

companys net cash stood at INR 4500 mn at the end of the quarter.

Industry IT / ITES

CMP (INR) 87Target (INR) 107

Upside / Downside 23%

52 week High / Low (INR) 93/37

Market Cap (INR bn) 2.59

3M Avg. Daily Volumes 2215.29

P / E (FY11 E) 11.2x

Shareholding Pattern (%)

Others

22.2% Promoters

28.3%

DII

7.1%

FII

42.4%

1 Year Stock Chart

20

50

80

110

140

170

200

230

260

290

Oct

Dec

Feb

Apr

Jun

Aug

Oct

HTL NSE Nifty

Stock Performance (%)

1 Month 3 Months 1 Year

HTL 12.2 19.3 112.9

Nifty 2.1 -8.5 -14.7

(INR in mn)

Particulars Actual Estimates

Total Income 3,660 3,510

EBITDA 686 545

Reported PAT 646 621* Source: Bloomberg, Unicon Research


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Consolidated Financials(INR in mn)

Q3 FY11 Q2 FY11 Q-o-Q Q3 FY10 Y-o-Y

Net Sales 3,660 3,341 9.5% 2,817 29.9%

Direct Costs 2,262 2,117 6.8% 1,874 20.7%

Total Income 1,398 1,224 14.2% 943 48.3%

Total Expenditure 712 713 -0.1% 703 1.3%

EBITDA 686 511 34.2% 240 185.8%

EBITDA (%) 18.74 15.29 345 bps 8.52 1022 bps

Depreciation and Amorisation 64 59 8.5% 58 10.3%

EBIT 622 452 37.6% 182 241.8%

Other Income(net) 122 104 17.3% 71 71.8%

Forex (Gains)/ Losses -38 -163 -76.7% 76 -150.0%

PBT before Exceptional Item 782 719 8.8% 177 341.8%

Exceptional Item 0 0 N.A 252 N.A

PBT 782 719 8.8% 429 82.3%

Tax 136 116 17.2% 9 1411.1%

PAT 646 603 7.1% 420 53.8%PAT (%) 17.7 18.0 -30bps 14.9 274 bps

EPS 2.16 2.01 7.5% 1.41 53%Source: Company, Unicon Research

Outlook & Valuation

Macro economic factors will be an important factor for all IT companies in the quarters moving ahead as the US and

Europe contributes to the majority of their revenue. HTL has delivered strong results over the last few quarters and the

management is upbeat about the future prospects of the company moving ahead, by giving improved revenue guidance.

The company has won some large deals over the last few quarters and we are optimistic about future wins for deals

currently in the pipeline. With large deals wins in the quarter, HTL has also seen a drop in attrition levels by 330 bps to

14.7% which is a positive sign for the company. At CMP 87 the stock is trading at P/E 11.2x FY11E earnings. We believe the

stock can see a potential upside of 23% and recommend a BUY on the stock with a revised price target of INR 107.


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Unicon Investment Ranking Methodology

Rating Buy Accumulate Hold Reduce Sell

Return Range >= 20% 10% to 20% -10% to 10% -10% to -20%

hexaware technologies ltd - q3fy11 result update

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