Hexaware Technologies

Hexaware reported a revenue of $210.6 mn in Q1 CY20, a drop of 1.1% in constant currency terms compared to Q4 CY19 revenue of $214.3 mn. In Q1 CY20 EBITDA came in at $31.3 mn whereas EBITDA margin came in at 14.9% declining by 80 bps Q-o-Q. Covid-19 impact in Q1 CY20 EBITDA margin is around 100-120 bps The impact of Covid-19 on hexaware has been relatively higher than its Indian peers. We expect both volume and price cuts for fresh contracts and renegotiation of existing contracts to keep the EBITDA margins under pressure for a few quarters coupled with that management's commentary also directed towards weaker guidance for a few quarters ahead. Hexaware Technologies trades at a trailing valuation of PE 12.07x which is significantly lower than 5 Year average value of ~17x fetched by the stock. We believe that the subdued valuation may balance out the covid impact on the performance of the near term future. We do not foresee an upside in the near term but that doesn't change the business structurally. At the current valuation we assign a HOLD rating to the stock.