*Hexaware*– Q1 FY20 (Audited –Cons)
CMP: 305
Total income from operations at 1,541 Cr
1,264 Cr (21.92%) YoY | 1,529 Cr (0.71%) QoQ
Year ending revenue: 5,582 Cr Vs. 4,648 Cr (20.09%)
Net Profit of 174.9 Cr
138.4 Cr (26.31%) YoY 167.8 Cr (4.22%) QoQ
Year ending Net profit: 641 Cr Vs. 583 Cr (9.93%)
EPS (in Rs.) 5.79
4.58 YoY | 5.56 QoQ
Year ending EPS: 21.24 Vs. 19.62
View: Result is overall good and in line with the expectation. YoY revenue Up and profit also up. Due to Covid – 19 impact and uncertainty in the current environment company has suspended the guidance that was provided earlier for FY 20.
Business Updates & Highlights:
Company is primarily into five operating verticals viz. BFSI – 9.8%, Travel & Transportation – 36.8% , Healthcare & Insurance – 20.1%, Mfg & Customer – 17% and High Tech & Professional Services -15.7% . YoY topline growth in BFSI –5.6 %, Travel & Transportation – 21.9% ,Healthcare & Insurance – 28.6%, Mfg & Customer –18.8% and High Tech & Professional Services – 29.8%. QoQ topline growth in BFSI – 1.9%, Travel & Transportation – (5.1%) , Healthcare & Insurance – (5.7%), Mfg & Customer – (6%) and High Tech & Professional Services – 2.8%. YoY bottom line growth for Rating services – 21%, Research services – (12.6%) and Advisory services – (83%).
Geography Verticals Americas – 74.2%, Europe –17.8% and Asia Pacific – 8%. YoY and QoQ topline growth for Americas – 14.1% and (2.1%) respectively, Europe – 65.4% and 0.4% respectively and Asia Pacific – (16.9%) and (2.4%) respectively.
EBITDA in Q1FY20 is around INR 233.6 Cr Vs. 237.7 Cr in Q1FY19 Vs. 188.6 Cr in Q4FY19 . Therefore up by 23.8% in YoY and (2.5%) in QoQ.
Total client stood as of Q1FY20 is around 273 and new clients added were 14 during this quarter. Headcount stood at 19,998 at the end of Q1 2020. Utilization stood at 76.5% in the Quarter.
NN wins in Q1 2020 with TCV of US$ 69M; one of the best quarters of NN signings
Financial
ROE and ROCE is around INR 26% and 33% respectively and book value per share is around INR 68 and share is currently trading at 4.4x of its book value. Company is currently trading at annualized PE of around 14 which is fair as per industry benchmark. Promoter holding is around 62.4% in the company which is good. FIIs and mutual fund hold around 16.8% and 11.94% in the company. Liquidity position is also good in the company. Cash and cash equivalent as of March 2020 is INR 441 Cr Vs. 252.8 Cr in Dec 2019.
Share View: Share price high 439 (52 week) and now 296 share corrected due to market has corrected around 20-25%. Hexaware is the fastest growing next-generation provider of IT, BPO and consulting services. Company serve customers in Banking, Financial Services, Capital Markets, Healthcare, Insurance, Manufacturing, Retail, Education, Telecom, High-Tech & Professional Services (Tax, Audit, Accounting and Legal), Travel, Transportation and Logistics. Company is focusing on Automation based application support, digitizing the back office.
Position: Short term support price is INR 265. Long term investor should continue with the company.
Opportunities: Share price has already corrected more than 30% from their peak. Further in current tough environment all work forces are WFH. So may in future also more than 50-60% staff can work in similar line WFH based on that company can easily save their operation and infrastructure cost which can optimize the cost in future and improve the bottom line with same set of topline.
Risk: Due to Covid – 19 impact short term Q2 and Q3FY20 is also impacted as major / significant revenue more than 74% from America and currently USA is more impacting on Covid-19 Impact and it can more worse. So short term can more pain.
Disclaimer: Views are shared based on market research and study and personal in nature. Others can take the different view and opinions. Please do the thoroughly study before enter or exit the shares.
RD Stock (“High Returns with Low Risk is the Key”)