Nomura maintains reduce rating on Hexawre post Q1 earnings

Share of Hexaware slipped around 6% on the Bombay Stock Exchange (BSE), after the company reported lower-than-expected net profit of Rs 83.4 crore for the quarter ended March 2015. Analysts at Nomura, for instance, had expected the company to clock in a net profit of Rs 96.8 crore.

The stock opened at Rs 289 and touched a low of Rs 278.10 on the BSE. As many as 202,568 shares had been traded on the BSE till 10:55am.

For the recently concluded quarter (Hexaware follows January – December financial year), the company reprted an uptick in utilisation by 60 bps (basis points) q-o-q to 73.6%, while onsite contribution has gone up by 130 bps q-o-q to 58.9%. Though the onsite revenue growth came in at 2.6% q-o-q, offshore revenue declined 2.7% q-o-q.

“While the miss on revenue growth largely mirrored what happened at other IT companies in this quarter, other negatives in the result such as: 1) sharp dip of 170 bps q-o-q in gross margins and 210 bps q-o-q on EBITDA margins; 2) continuation of high onsite-led growth; 3) worsening of DSO (days sales outstanding) by 14 days q-o-q to 77 days, and 4) increase in attrition to 16.6% up 260 bps q-o-q (highest in over past 15 quarters) will be an overhang on the stock in our view. We maintain Reduce,” said Ashwin Mehta and Pinku Pappan of Nomura in a post results note.