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Hexaware Technologies revenue jumped on 20.1% and EBITDA Margin showed almost no change

11-02-2020 • About Hexaware Technologies ($HEXAWARE) • By InTwits

Hexaware Technologies reported 2019 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • Hexaware Technologies is a fast growth stock: 2019 revenue growth was 20.1%, 5 year revenue CAGR was 16.7% at 2019 ROIC 30.7%
  • EBITDA Margin is relatively stable: 15.7% in 2019 vs. 15.8% in 2018 vs. 17.2% in 2015
  • Hexaware Technologies has low CAPEX intensity: 5 year average CAPEX/Revenue was 3.3%. At the same time it's in pair with industry average of 3.0%
  • CAPEX is quite volatile: ₹1,296m in 2019, ₹609m in 2018, ₹957m in 2017, ₹2,223m in 2016, ₹1,367m in 2015
  • The company has highly profitable business model: ROIC is 30.7%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

The company's Revenue jumped on 20.1%. During 2015-2019 Revenue growth bottomed in 2017 at 11.5% and was accelerating since that time. EBITDA Margin showed almost no change in 2019. EBITDA Margin followed a declining trend at -0.34 pp per annum in the last 5 years.

Net Income margin decreased slightly on 1.1 pp from 12.6% to 11.5% in 2019.

Investments (CAPEX, working capital and M&A)

In 2019 Hexaware Technologies had CAPEX/Revenue of 2.3%. Hexaware Technologies's CAPEX/Revenue decreased on 4.0 pp from 6.3% in 2016 to 2.3% in 2019. Average CAPEX/Revenue for the last three years was 2.0%.

Return on investment

The company operates at high and attractive ROIC (30.7%) and ROE (24.9%). ROIC decreased slightly on 1.6 pp from 32.3% to 30.7% in 2019. ROE decreased slightly on 1.7 pp from 26.5% to 24.9% in 2019. ROIC stuck to a declining trend at -1.2 pp per annum in 2015-2019. ROE followed a declining trend at -0.79 pp per annum in the last 5 years.

Leverage (Debt)

Company's Net Debt / EBITDA is -0.1x and Debt / EBITDA is 0.2x. Debt surged while cash dropped on 72.3%.

Hexaware Technologies has no short term refinancing risk: cash is higher than short term debt (175,655.1%).

Management team

Hexaware Technologies's CEO is R Srikrishna "Keech". R Srikrishna "Keech" has 6 years tenure with the company. Hexaware Technologies's CFO Vikash Kumar Jain has spent 2 years with the company.

Financial and operational results

FY ended 31-12-2019

Hexaware Technologies ($HEXAWARE) key annual financial indicators

mln. INR201520162017201820192019/2018
Net Income3,9324,1924,9955,8356,4139.9%
Stock Based Compensation374
Balance Sheet
Accounts Receivable8,031
Accounts Payable3,300
Short Term Debt0001
Long Term Debt0001,429
Cash flow
Revenue growth21.0%13.2%11.5%17.9%20.1%
EBITDA growth12.2%7.6%13.7%12.0%19.7%

EBITDA Margin17.2%16.3%16.6%15.8%15.7%-0.1%
EBIT Margin14.4%
SG&A, % of revenue0.5%
SBC, % of revenue0.8%
Net Income Margin12.6%11.9%12.7%12.6%11.5%-1.1%
CAPEX, % of revenue4.4%6.3%2.4%1.3%2.3%1.0%

Net Debt/EBITDA-0.7x-0.5x-0.8x-1.1x-0.1x1.0x

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, %

Top  FY2015 FY2016 FY2017 FY2018 FY2019
Financial Technologies (India) ($FINANTECH)-62.4%-2.6%6.5%48.1%-
Ajel ($AJEL)---25.6%-55.4%-18.6%
Median (2 companies)8.1%9.1%-9.6%-3.6%-18.6%
Hexaware Technologies ($HEXAWARE)-13.2%11.5%17.9%20.1%

Top companies by EBITDA margin, %

Top  FY2015 FY2016 FY2017 FY2018 FY2019
Ajel ($AJEL)-3.5%---11.7%
Median (1 company)12.3%13.6%-57.3%-22.7%-11.7%
Hexaware Technologies ($HEXAWARE)17.2%16.3%16.6%15.8%15.7%

Top companies by CAPEX/Revenue, %

Top  FY2015 FY2016 FY2017 FY2018 FY2019
Ajel ($AJEL)----3.2%
Median (1 company)3.0%2.7%9.2%4.7%3.2%
Hexaware Technologies ($HEXAWARE)4.4%6.3%2.4%1.3%2.3%

Top companies by ROIC, %

Top  FY2015 FY2016 FY2017 FY2018 FY2019
Financial Technologies (India) ($FINANTECH)--7.4%-4.3%-2.9%-
Ajel ($AJEL)-----
Median (2 companies)19.4%18.9%-4.3%-2.9%-
Hexaware Technologies ($HEXAWARE)35.7%33.8%33.5%32.3%30.7%