Buy Hexaware Technologies, target price Rs 425: Centrum Broking

Centrum Broking has given a buy rating to Hexaware Technologies with a target price of Rs 425. The share price moved up by 0.84 per cent from its previous close of Rs 415.35. The stock’s last traded price is Rs 418.45.

Hexaware Technologies Ltd., incorporated in the year 1992, is a Mid Cap company (having a market cap of Rs 12412.49 Crore) operating in IT Software sector.

Financials
For the quarter ended 30-06-2020, the company reported a Consolidated sales of Rs 1561.99 Crore, down 1.46 % from last quarter Sales of Rs 1585.17 Crore and up 19.39 % from last year same quarter Sales of Rs 1308.34 Crore Company has reported net profit after tax of Rs 152.24 Crore in latest quarter.

Investment Rationale
The brokerage believes investors could bid at Rs450-480 band (16x to 17x CY22E EPS) and this could be fair price in its view. Hexaware trades at 30% discount to LT Infotech currently which appears reasonable (LT Infotech has larger scale and superior margins (revenue at USD1600mn and headcount at 31,500 and EBIT margin of 16.9%). Hexaware stock 5-year average one year forward P/E multiple is 16x and 3-year average one year forward P/E multiple is 17x. Assuming bid price of Rs480/sh, we are valuing Hexaware at 19.3x one year forward EPS. While street might argue that P/E multiples across IT pack have expanded, it notes Baring is buying a large portion and hence would require some room for upside. Hence, they would also look for room for safety.

Promoter/FII Holdings
Promoters held 62.3 per cent stake in the company as of June 30, 2020, while FIIs held 14 per cent, DIIs 12.1 per cent and public and others 11.5 per cent.