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Hexaware Tech shares rise 4%; Nuvama initiates 'Buy' sees 22% upside
At 10:38 AM, Hexaware Technologies shares were trading 3.19 per cent higher at ₹798.85 per share. In comparison, BSE Sensex was up 0.41 per cent at 82,193.14.
Nuvama Institutional Equities initiates coverage on Hexaware Technologies
The domestic brokerage initiated coverage with a 'Buy' call, keeping the target at ₹950 per share, valuing the stock at 30x CY27E PE. The target price implies 22 per cent upside from the previous close at ₹774.15 per share.
In its note, Nuvama said that Hexaware Technologies is in a sweet spot today with a revenue base of $1.4 billion and an employee base of 32,000, leaving ample space for growth while, at the same time, not allowing the large base to drag growth. Its bigger size today ($1–5 billion zone) enables it to chase the bulk of large deals, providing the best-of-both-world benefits.
The brokerage estimates an 11 per cent USD compound annual growth rate (CAGR) over the next three years.
Further, diversified vertical presence, improving client mix, and margin tailwinds have strengthened the company's investment appeal following a recent share price correction, according to Nuvama.
The company maintains a multi-pronged footprint across large traditional sectors such as banking, financial services and insurance (BFSI) and manufacturing, alongside a right-to-win in niche verticals including professional services and hi-tech, according to Nuvama's report. It also reports a growing presence in travel and healthcare, positioning it to benefit from cyclical upswings in legacy industries while capturing incremental demand in faster-growing segments.
On the financial front, the company is believed to have a robust margin profile akin to mid-cap peers. It has historically posted Earnings before interest, tax, depreciation and amortisation (Ebitda) margins in the 15–16 per cent range—except in the last three years due to exceptional items.
Going forward, Nuvama expects exceptional items to reduce and the adjusted Ebitda margin shall rise 50 basis points (bps) in CY25 and another 50 bps over the next two years to 17.4 per cent in CY27. All along, it is likely to maintain a stable cash flow profile with OCF/Ebitda of about 84 per cent—outpacing peers
On the valuation front, following a pullback after softer Q2CY25 results and commentary, Hexaware looks attractive relative to two prevailing market buckets: high-growth but expensive names (such as Coforge and Persistent) and lower-growth but inexpensive top-tier IT stocks, according to analysts.
With macro conditions expected to improve, they believe the current market price offers an opportunity to own a quality franchise at a discounted multiple.
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