MOSL: HEXAWARE TECHNOLOGIES (Neutral)- Operational miss; weak outlook
HEXAWARE TECHNOLOGIES: Operational miss; weak outlook
(HEXW IN, Mkt Cap USD1.6b, CMP INR375, TP INR400, 7% Upside, Neutral)
Expect growth headwinds in the near term
- Reported growth and margins were impacted by ramp downs at a key client and longer-than-usual furloughs. Client-specific challenges are expected to continue for one more quarter. Organic growth outlook (our estimate: 7.3%-9.5% YoY) remains weak. We expect margins to remain flat in CY20.
- Our EPS estimates are largely unchanged. Maintain Neutral.
Client-specific challenges remain a key overhang
- Revenue rose 22% YoY (our estimate: 23% YoY) to USD214m, EBIT was up 16% YoY at INR2b (5% miss), while PAT grew 36% YoY to INR1.7b (9% miss).
- Revenue grew 1.3% QoQ CC. Change in mix, a decline in bill rates and furloughs were the key headwinds for revenue growth. Strong increase in volumes was the key tailwind.
- Among geographies, Europe (7.4% QoQ, USD) and APAC (2.8% QoQ) drove growth, while North America remained an overhang (0.5% QoQ).
- Most verticals – except BFS (-6.3% QoQ) – reported strong growth. Sharp decline in BFSI was attributed to the challenges at a key client (Freddie Mac).
- Ramp down at the key client impacted most of the service lines, except IMS (13.3% QoQ) and BPS (4.2% QoQ).
Hexaware is a global provider of IT and Process outsourcing services. Co. focuses on maximizing client returns from outsourcing and off-shoring. Co. manages IT applications in real time as well as providing high value services around packaged enterprise applications such as SAP and PeopleSoft. Co. maintains operations in business process outsourcing arena. Co.'s solutions aim to provide value by optimising cost of ownership of technology investments for customers. Co. maintains a client base comprising several Global 1000 organizations. Co.'s global operations are located in North America, Europe and Asia Pacific.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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