Is Hexaware Technologies a solid growth stock? - The numbers tells it is
10-02-2016 • About Hexaware Technologies (
$HEXAWARE) • By InTwits
Pay attention to Hexaware Technologies as a growth stock. It showed noticeble revenue performance in the last years among with attractive profitability and financial model.
Growth story
Hexaware Technologies showed fast growth in the last financial year. Hexaware Technologies's revenue surged on 21.0% in FY2015. The growth also happened in EBITDA of 12.2% for the same period.
If we look for the longer period Hexaware Technologies showed fast revenue growth of 17.0% from FY2012 to FY2015 annually. EBITDA surged on 9.86% from FY2012 to FY2015 annually.
Hexaware Technologies ($HEXAWARE) financials for the last 5 years
| mln. INR | FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Revenue | 14,505 | 19,482 | 22,853 | 25,817 | 31,235 |
|---|
| Revenue growth, % | | 34.3% | 17.3% | 13.0% | 21.0% |
|---|
| SG&A, % | | | | | 0.482% |
|---|
| EBITDA | 2,614 | 4,041 | 5,130 | 4,776 | 5,358 |
|---|
| EBITDA growth, % | | 54.6% | 26.9% | -6.9% | 12.2% |
|---|
| EBITDA margin, % | 18.0% | 20.7% | 22.4% | 18.5% | 17.2% |
|---|
| Net Income | 2,670 | 3,276 | 3,791 | 3,202 | 3,932 |
|---|
| Net Income margin, % | 18.4% | 16.8% | 16.6% | 12.4% | 12.6% |
|---|
| |
| CAPEX | 633 | 744 | 411 | 604 | 1,367 |
|---|
| CAPEX/Revenue, % | 4.36% | 3.82% | 1.80% | 2.34% | 4.38% |
|---|
| Debt | 0 | 0 | 0 | 0 | 0 |
|---|
| Cash | 487 | 676 | 1,226 | 2,865 | 3,862 |
|---|
| Net Debt/EBITDA | -0.2x | -0.2x | -0.2x | -0.6x | -0.7x |
|---|
| |
| ROIC, % | 23.8% | 33.5% | 39.2% | 34.7% | 35.7% |
|---|
| ROE, % | 26.9% | 29.5% | 31.6% | 25.7% | 28.9% |
|---|
Profitability and return on investment
Despite revenue growth EBITDA margin declined slightly from 18.5% in FY2014 to 17.2% in FY2015. In the longer period EBITDA margin dropped on 3.50 pp from 20.7% in FY2012 to 17.2% in FY2015.
We call Hexaware Technologies an attractive growth stock as together with the growth it delivers high ROIC at 35.7%. During the last three years it increased - it was 33.5% in FY2012. Average ROIC for the last three years was 36.5%.
Net Income margin increased slightly on 0.200 pp from 12.4% to 12.6% in FY2015. If we look for the longer period Hexaware Technologies's Net Income margin dropped on 4.20 pp from 16.8% in FY2012 to 12.6% in FY2015.
Hexaware Technologies operates at ROE of 28.9%. It's average ROE for the last three years was 28.7%.
Capital expenditures (CAPEX)
In FY2015 Hexaware Technologies had CAPEX/Revenue of 4.38%. The company showed fast CAPEX/Revenue growth of 0.558 pp from 3.82% in FY2012 to 4.38% in FY2015. It's average level of CAPEX/Revenue for the last three years was 2.84%.
Leverage (Debt)
Having such a fast growth profile Hexaware Technologies keeps negative net debt at -0.7x Net Debt/EBITDA. If we look for the longer period Hexaware Technologies's leverage surged on 0.55x from -0.17x in FY2012 to -0.72x in FY2015.
Management team
Hexaware Technologies is headed by R Srikrishna as a CEO.
Peers in IT Consulting & Software
Below you can find Hexaware Technologies benchmarking vs. other companies in IT Consulting & Software industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.
Top companies by Revenue growth, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Ramco Systems ($RAMCOSYS) | | 9.3% | 7.3% | 9.9% | 37.0% |
| Cyient ($CYIENT) | | 30.7% | 20.6% | 17.8% | 24.0% |
| Empower India ($EMPOWER) | | -3.7% | -13.2% | -32.6% | 23.9% |
| Tech Mahindra ($TECHM) | | 6.8% | 25.2% | 174.0% | 20.1% |
| Mindtree ($MINDTREE) | | 26.6% | 23.2% | 28.8% | 17.0% |
| |
|---|
| Median (20 companies) | -44.3% | 22.7% | 20.6% | 14.3% | 9.1% |
|---|
| Hexaware Technologies ($HEXAWARE) | | 34.3% | 17.3% | 13.0% | 21.0% |
Top companies by Gross margin, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top |
|---|
| Tata Consultancy Services ($TCS) | | | | 47.4% | 42.4% |
| Infosys ($INFY) | 45.3% | 41.3% | 98.1% | 35.9% | 38.3% |
| Mindtree ($MINDTREE) | 32.8% | 31.5% | 36.2% | | 34.8% |
| Wipro ($WIPRO) | 31.5% | 29.2% | 30.4% | 32.0% | 31.6% |
| |
|---|
| Median (4 companies) | 34.7% | 32.7% | 36.2% | 35.9% | 36.6% |
|---|
Top companies by EBITDA margin, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Oracle Financial Services Software ($OFSS) | 37.4% | 35.3% | 35.2% | 37.4% | 39.7% |
| Infosys ($INFY) | 32.5% | 31.6% | 27.9% | 26.3% | 27.1% |
| Tata Consultancy Services ($TCS) | 29.9% | 29.5% | 28.6% | 30.7% | 26.1% |
| Wipro ($WIPRO) | 21.1% | 19.1% | 20.9% | 22.4% | 22.3% |
| Mindtree ($MINDTREE) | 11.8% | 15.1% | 19.8% | 20.6% | 20.3% |
| |
|---|
| Median (24 companies) | 18.0% | 15.1% | 16.5% | 18.3% | 13.2% |
|---|
| Hexaware Technologies ($HEXAWARE) | 18.0% | 20.7% | 22.4% | 18.5% | 17.2% |
Top companies by CAPEX/Revenue, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Ramco Systems ($RAMCOSYS) | 16.4% | | 22.1% | 15.3% | 12.4% |
| Niit Technologies ($NIITTECH) | 4.1% | 5.9% | 4.6% | 6.1% | 7.9% |
| Financial Technologies (India) ($FINANTECH) | 64.7% | 8.6% | 11.2% | | 6.5% |
| Mindtree ($MINDTREE) | 5.6% | 2.5% | 4.5% | 5.0% | 5.6% |
| Tech Mahindra ($TECHM) | 3.0% | 5.4% | 2.6% | 5.0% | 5.0% |
| |
|---|
| Median (19 companies) | 4.0% | 3.8% | 3.5% | 3.5% | 3.1% |
|---|
| Hexaware Technologies ($HEXAWARE) | 4.4% | 3.8% | 1.8% | 2.3% | 4.4% |
Top companies by ROIC, %
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| Tata Consultancy Services ($TCS) | 47.1% | 48.6% | 48.4% | 50.2% | 40.5% |
| Mindtree ($MINDTREE) | 14.9% | 24.9% | 34.6% | 36.2% | 32.0% |
| Sqs India Bfsi ($SQSBFSI) | 0.1% | 12.1% | 27.0% | 29.4% | 30.6% |
| Tech Mahindra ($TECHM) | 19.2% | 15.4% | 20.1% | 43.0% | 29.7% |
| Cmc ($CMC) | 31.5% | 26.2% | 33.2% | 35.3% | 26.0% |
| |
|---|
| Median (29 companies) | 16.0% | 19.1% | 20.4% | 22.9% | 19.4% |
|---|
| Hexaware Technologies ($HEXAWARE) | 23.8% | 33.5% | 39.2% | 34.7% | 35.7% |
Top companies by Net Debt / EBITDA
| FY2011 | FY2012 | FY2013 | FY2014 | FY2015 |
|---|
| Top 5 |
|---|
| 3I Infotech ($3IINFOTECH) | 3.5x | 8.5x | 20.3x | 27.7x | 14.7x |
| Ramco Systems ($RAMCOSYS) | 4.0x | 8.8x | | 27.6x | 4.2x |
| Onward Technologies ($ONWARDTEC) | 2.7x | 2.4x | 2.2x | 4.1x | 1.9x |
| Kpit Technologies ($KPIT) | -0.7x | 0.3x | 0.5x | 0.7x | 0.4x |
| Mphasis ($MPHASIS) | 0.0x | -0.1x | 0.2x | | 0.2x |
| |
|---|
| Median (22 companies) | -0.1x | -0.0x | -0.2x | -0.2x | -0.2x |
|---|
| Hexaware Technologies ($HEXAWARE) | -0.2x | -0.2x | -0.2x | -0.6x | -0.7x |
