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* Hexaware Technologies’ stock price was up 0.5% in yesterday’s trade, while the BSE Sensex rose 0.2%.
* Hexaware’s 3QCY18 revenue grew by 1.6% QoQ (+2.1% QoQ in CC terms) to US$171.1mn owing to unseasonal furloughs with a client, delays in ramp-up in 2 deals and staffing issues in the US.
* From a vertical perspective, subdued revenue growth can be attributed to poor performances in Travel & Transportation (-3.9% QoQ), BFSI (+0.9%) and MFG & Consumer verticals (-5.8% QoQ, all in USD terms).
* The company downgraded its CY18 revenue growth guidance to 11-12% from 12-13% earlier. On the other hand, EPS growth guidance was raised to >20% from 13-14% earlier owing to better margins.
*Owing to client-specific issues, Hexaware’s growth has been slowing down over the past few quarters.
* However, the steep >25% correction in stock price over the past 3 months has made the valuation more reasonable at 14.3x CY19E EPS.
* At this level, we have a positive view on the stock in light of reasonable valuations, good business profile and minimal debt, with a TP of Rs380.
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