- We expect USD revenue to grow 4.1% QoQ to USD126.6m. In 1Q, HEXW was impacted by client-specific issues. The company expects growth for the year to be dominated by 2Q and 3Q.
- EBITDA margin has declined by 320bp in the last two quarters. While the decline in 4Q was attributed to several one-offs, 1Q was a result of revenue decline, calendar and H1B visa/medical expenses. We expect some recouping of profitability given the revival of revenue growth in 2QCY16 and one-offs in 1Q. Expect EBITDA margin of 16% (+140bp QoQ).
- Our PAT estimate for the quarter is INR1,045m, up 24.1% from the previous quarter, on the back of higher revenue, margins and Other Income.
- Dividend payout has remained healthy thus far, and is expected to continue in line with the policy through the year. We expect a dividend of INR2.1/share, maintaining a payout ratio of 65%.
- The stock trades at 17.1x CY16E and 15.3x CY17E earnings. Neutral.
Key issues to watch for
- Large deal pipeline and traction post the increased S&M spend.
- Commentary on sustenance of revenue growth and margins.
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- Dividend payout during the quarter.