Motilal Oswal initiates coverage on Hexaware Technologies; check rating and target price

Hexaware Technologies, a leading mid-tier IT services provider, is making a comeback on the Indian stock market after a four-year break. The company has recorded a consistent 14% compound annual growth rate (CAGR) in USD revenue from 2020 to 2024, largely due to strong ecosystem partnerships and a diversified service portfolio.

Motilal Oswal Financial Services has initiated coverage on Hexaware, projecting a 12.2% CAGR in US dollar revenue for 2024-2026, surpassing the Tier-1 average of 4.1%. The firm expects Hexaware’s earnings before interest and tax (EBIT) margin to improve from 14.6% in 2025 to 15.3% in 2027, benefiting from operating leverage and offshore expansion.

Hexaware’s 'Land, Ramp, and Expand' strategy has been pivotal in its growth, successfully navigating challenges in key accounts such as Fannie Mae through diversification. Its mid-tier and smaller clients are expected to grow at a robust 13-17% CAGR, offsetting any pressures from larger accounts.

Shares of Hexaware Technologies rose about 1.5 per cent to Rs 808.80 on Monday, with its market capitalization slipping below Rs 49,000 crore mark. The stock had settled at Rs 796.55 on Friday. The IT stock has surged more than 36 per cent from its 52-week low at Rs 592.95, hit about one and a half month ago.

The company has strategically positioned itself with diversified service offerings across Design & Build, Secure & Run, Data & AI, and BPO sectors. Notably, the Data & AI segment is the fastest-growing, driven by acquisitions like Softcrylic. This positions Hexaware for continued expansion, despite cautious client sentiment.

In the competitive landscape, Hexaware is gaining traction in vendor consolidation deals, particularly within the Financial and Professional Services sectors. Despite current economic headwinds, such as ongoing trade wars and slower Fed rate cuts impacting discretionary IT spending, Hexaware's broad vertical exposure acts as a buffer.

Hexaware Technologies made its stock market debut in February 2025, when the company raised a total of Rs 8,750 crore by selling its shares for Rs 708 apeice, with a lot size of 21. The stock is trading 14 per cent above its IPO price. The stock is down 7 per cent from its 52-week high at Rs 850 apiece.

Motilal Oswal values Hexaware at 32 times its March 2027 estimated earnings per share, with a target price of Rs 950, representing a 19% upside. This valuation comes with a BUY rating, reflecting Hexaware's strong execution and improved margin profile.

The firm also highlights an expected earnings per share (EPS) CAGR of 20.8% over 2024-2026, placing Hexaware in the industry's top performance quadrant. This strong growth outlook is underpinned by its strategic transformation led by R Srikrishna since 2015.

Despite current macroeconomic uncertainties, Hexaware is viewed as structurally well-positioned for the medium term, thanks to its diversified offerings and focus on high-value clients, ensuring resilience in a challenging market environment.