Hexaware Technologies Ltd beat Street estimates for both the December quarter results as well as its revenue guidance for 2012. In the three months ended December, revenues grew by 6.7% to $84.1 million, on the back of a 4.8% increase in volumes.
Most midcap information technology firms have been underperforming larger peers lately. But Hexaware’s growth has been far ahead of the industry average. In 2011, its revenues grew by 33% to $308.1 million.
P.R.Chandrasekar, global chief executive officer & vice- chairman, Hexaware beats estimates Ltd
What’s more, the company expects revenues to grow by 20% to $370 million in 2012. This is considerably above
Bloomberg consensus estimates of revenues of $350 million in 2012.
The company had announced a large $250 million deal last quarter, to be executed over five years. According to Edelweiss Securities Ltd, the order is from an existing client, and will lead to incremental revenues of $12 million annually. Revenues are growing across industry segments and service lines, the company said, unlike the situation until only a couple of years ago, when only some segments grew.
Additionally, the above average growth in revenues is leading to a significant increase in profit margin. Earnings before interest, tax, depreciation and amortization (Ebitda) margin rose to 23% in the December quarter, compared with 11.5% in the year-ago period. For the year, profit margin doubled from around 9% to 18.2%.
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The simultaneous jump in revenues and profit margin led to an outsized 182% jump in Ebitda last year. It isn’t surprising, then, that the company’s shares have risen by over 70% in the past one year, despite a 10% drop in the CNX IT Index on the National Stock Exchange. While similar improvements in the company’s profit margin cannot be expected, revenue growth can be expected to be healthy, thanks to some large deal wins by the company of late.
Emkay Global Financial Services Ltd said in a post-results note that it has raised its earnings per share estimates for the company by 8% and 9%, respectively, for 2012 and 2013. It adds, “Despite a roughly 90% outperformance in the past one year, we continue to find valuations attractive at less than 10 times 2013 earnings, for a company that’s expected to grow Ebitda at a compound annual growth rate of 20% over calendar years 2011-13 and enjoys a dividend yield of around 5%.”
Graphic by Yogesh Kumar/Mint
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