Hexaware Gets 'Buy' Rating As Motilal Oswal Initiates Coverage

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Motilal Oswal Report

Backed by a strong foundation of strategic partnerships, differentiated capabilities, and a well-diversified revenue mix, Hexaware Technologies Ltd. is well-positioned within the mid-tier IT services space.

What sets it apart is its sharp GTM strategy aimed at scalable growth, robust cash conversion, and deep client mining capabilities.

However, the near-term outlook remains fluid, with discretionary tech spending still unfolding - particularly across key verticals like US Banking, Healthcare, and Hi-Tech.

Hexaware’s strong execution, ongoing vendor consolidation wins, and midtier account traction provide resilience.

We estimate a CAGR of ~12.2% in USD revenue for Hexaware over CY24-26E, outperforming the Tier-1 average of 4.1% and in-line with tier-2 average of 12.6%. Additionally, its Ebit margin is set to improve steadily from 14.6% in CY25E to 15.3% in CY27E, supported by operating leverage and offshore expansion.

With an EPS CAGR of 20.8% over CY24-CY26E, higher than the Tier-I/Tier-II average of 10.0%/13.5%, Hexaware is in the top quadrant of performance within the industry.

Given its strong execution, diversified vertical exposure and improving margin profile, we initiate coverage with a Buy rating.

We value Hexaware at 32x Mar’27E EPS (15% discount to Coforge’s P/E multiple) with a target price of Rs 950 (19% upside).

Key risks:

1. Top-5 accounts, particularly Fannie Mae, could impact financial performance if client spending slows;

2. Discretionary IT spending remains in flux, particularly among large enterprises, as businesses adopt a “wait-andwatch” approach amid macro uncertainties;

3. Rising competition from both IT service providers and in-house IT teams poses a challenge to maintaining market share and pricing power;

4. Insourcing trend: As enterprises explore insourcing over outsourcing, HEXT must continuously innovate and deliver value-driven solutions to sustain long-term engagements;

5. Shifting interest rate expectations, potential policy changes, and global trade tensions could impact client decision-making in key markets like the US and Europe.

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