HEXT

Hexaware (HEXT) is one of the leading mid-tier IT services providers, and is reentering the Indian stock market following a four-year hiatus. HEXT has delivered consistent growth with a 14% CAGR in USD revenue over CY20-24, supported by robust ecosystem partnerships, a focused go-to-market (GTM) strategy, and diversified service lines across Design & Build, Secure & Run, Data & AI, and BPO. With a focus on high-value, scalable clients, the company has consistently expanded its revenue base. Its "Land, Ramp, and Expand" strategy has been instrumental in driving growth. While some key accounts, like Fannie Mae, have faced challenges, HEXT has navigated these headwinds by doubling down on diversification and client mining. Its mid-tier and smaller clients, growing at a strong 13-17% CAGR, have more than made up for the pressure, keeping overall growth on track. Outlook With an EPS CAGR of 20.8% over CY24-CY26E, higher than the Tier-I/Tier-II average of 10.0%/13.5%, HEXT 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.