Angel Broking is bullish on Hexaware Technologies and has recommended buy rating on the stock with a target of Rs 123 in its December 07, 2012 research report.
“Hexaware Technologies (Hexaware) has announced downward revision of its 4QCY2012 revenue guidance to US$92mn from US$94.7-96.5mn earlier; and thereby its full year CY2012 USD revenue growth guidance is now lowered down to 18% yoy from 20% earlier. The company attributed this to a sudden change in project scope and deliverables from a large client which is amongst its top-10 clients. This decline is likely to impact 4QCY2012 operating margin by 500-700bp qoq. However, the management indicated that this is a one-off event and the rest of the business currently continues to operate as earlier.”
“Hexaware has downgraded its 4QCY2012 revenue guidance from a range of US$94.7-96.5mn (2-4% qoq growth) to US$92mn (1% qoq decline) due to changes in the scope and timeline of one specific project with one of its top-10 clients. Also, hurricane Sandy’s negative impact of US$0.45mn is built in into the guidance cut. The management also hinted that growth and margin in 1QCY2013 could also be impacted, but reiterated that the worst is behind. The management indicated that this will have a material adverse impact on the profitability margin metrics during 4QCY2012 and could impact operating margins by 500-700bp qoq. This downward revision seems to be disproportionate as the revenue cut is of US$2.5-4.5mn while EBITDA is being cut by US$6-7mn. The downward revision in guidance and margin decline has lead to our CY2013E revenue growth estimate being revised down to 13.5% from 15.0% and EBITDA margin to 19.8% from 21.1% earlier. EPS estimate of CY2012 and CY2013 is being revised down by 6% and 8.5% to Rs10.7 and Rs11.2, respectively.”
“We believe that this is a one-off event and the rest of the business currently continues to operate as earlier. This move is undoubtedly negative, but we believe the steep ~25% fall in Hexaware’s stock price over the past three months, captures most of the negatives at this juncture and the current level makes a good entry point to the stock. We maintain our Buy rating on the stock with a revised target price of Rs123, valuing it at 11x CY2013E EPS,” says Angel Broking research report.
“Hexaware Technologies (Hexaware) has announced downward revision of its 4QCY2012 revenue guidance to US$92mn from US$94.7-96.5mn earlier; and thereby its full year CY2012 USD revenue growth guidance is now lowered down to 18% yoy from 20% earlier. The company attributed this to a sudden change in project scope and deliverables from a large client which is amongst its top-10 clients. This decline is likely to impact 4QCY2012 operating margin by 500-700bp qoq. However, the management indicated that this is a one-off event and the rest of the business currently continues to operate as earlier.”
“Hexaware has downgraded its 4QCY2012 revenue guidance from a range of US$94.7-96.5mn (2-4% qoq growth) to US$92mn (1% qoq decline) due to changes in the scope and timeline of one specific project with one of its top-10 clients. Also, hurricane Sandy’s negative impact of US$0.45mn is built in into the guidance cut. The management also hinted that growth and margin in 1QCY2013 could also be impacted, but reiterated that the worst is behind. The management indicated that this will have a material adverse impact on the profitability margin metrics during 4QCY2012 and could impact operating margins by 500-700bp qoq. This downward revision seems to be disproportionate as the revenue cut is of US$2.5-4.5mn while EBITDA is being cut by US$6-7mn. The downward revision in guidance and margin decline has lead to our CY2013E revenue growth estimate being revised down to 13.5% from 15.0% and EBITDA margin to 19.8% from 21.1% earlier. EPS estimate of CY2012 and CY2013 is being revised down by 6% and 8.5% to Rs10.7 and Rs11.2, respectively.”
“We believe that this is a one-off event and the rest of the business currently continues to operate as earlier. This move is undoubtedly negative, but we believe the steep ~25% fall in Hexaware’s stock price over the past three months, captures most of the negatives at this juncture and the current level makes a good entry point to the stock. We maintain our Buy rating on the stock with a revised target price of Rs123, valuing it at 11x CY2013E EPS,” says Angel Broking research report.
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