HEXT - Fundamental Analysis: Financial Health & Valuation
Back to ListFundamental Rating: 4.0
| Stock Code | HEXT | Market Cap | 43,135 Cr. | Current Price | 706 ₹ | High / Low | 900 ₹ |
| Stock P/E | 41.7 | Book Value | 55.8 ₹ | Dividend Yield | 1.63 % | ROCE | 32.3 % |
| ROE | 25.7 % | Face Value | 1.00 ₹ | DMA 50 | 729 ₹ | DMA 200 | 707 ₹ |
| Chg in FII Hold | -0.16 % | Chg in DII Hold | 0.18 % | PAT Qtr | 271 Cr. | PAT Prev Qtr | 328 Cr. |
| RSI | 43.9 | MACD | -12.0 | Volume | 1,17,285 | Avg Vol 1Wk | 6,38,919 |
| Low price | 590 ₹ | High price | 900 ₹ | PEG Ratio | 4.27 | Debt to equity | 0.11 |
| 52w Index | 37.3 % | Qtr Profit Var | 37.8 % | EPS | 17.0 ₹ | Industry PE | 23.9 |
💹 Core Financials: HEXT demonstrates strong profitability with ROE at 25.7% and ROCE at 32.3%, reflecting efficient capital utilization. Debt-to-equity ratio of 0.11 indicates a healthy balance sheet with low leverage. Quarterly PAT declined from ₹328 Cr. to ₹271 Cr., showing earnings pressure despite overall strong fundamentals. Dividend yield of 1.63% provides moderate income. EPS at ₹17.0 highlights consistent earnings power.
📊 Valuation Indicators: Current P/E of 41.7 is significantly higher than the industry average of 23.9, suggesting overvaluation. Book value of ₹55.8 against CMP of ₹706 implies a high P/B ratio (~12.6). PEG ratio of 4.27 indicates stretched valuation relative to growth prospects. Intrinsic value appears lower than CMP, pointing to limited upside at current levels.
🏢 Business Model & Competitive Advantage: HEXT operates in IT services and digital transformation, with strong positioning in niche technology solutions. Its competitive advantage lies in high-margin services, strong client relationships, and efficient capital usage. However, scale limitations compared to larger peers may restrict growth momentum.
💰 Entry Zone Recommendation: Considering DMA 50 at ₹729 and DMA 200 at ₹707, the stock is trading near long-term support. A favorable entry zone would be ₹640–₹680 during corrections. Current levels remain slightly overvalued relative to intrinsic metrics.
📈 Long-Term Holding Guidance: HEXT remains fundamentally strong with robust returns, low debt, and consistent dividends. Long-term investors can hold, while new investors should wait for dips to improve risk-reward balance.
Positive
- Strong ROE (25.7%) and ROCE (32.3%) reflect efficiency.
- Debt-to-equity ratio of 0.11 ensures financial stability.
- Dividend yield of 1.63% provides moderate income.
- Strong positioning in niche IT services.
Limitation
- P/E ratio (41.7) is much higher than industry average (23.9).
- P/B ratio (~12.6) indicates expensive valuation.
- PEG ratio of 4.27 suggests stretched valuation relative to growth.
- Quarterly PAT declined from ₹328 Cr. to ₹271 Cr.
Company Negative News
- Decline in FII holdings (-0.16%) signals reduced foreign investor confidence.
- Stock trading below DMA 50 indicates short-term weakness.
Company Positive News
- Increase in DII holdings (+0.18%) reflects domestic institutional support.
- Strong return ratios (ROE and ROCE) highlight efficiency.
- Consistent dividend payouts support investor sentiment.
Industry
- IT services industry benefits from global demand for digital transformation.
- Industry P/E at 23.9 suggests peers trade at more reasonable valuations.
- Competition from Infosys, TCS, and Wipro creates pricing pressure.
Conclusion
⚖️ HEXT is a fundamentally strong company with excellent return ratios, low debt, and consistent dividends. However, valuations are stretched compared to industry peers, and earnings have shown recent pressure. Long-term investors can hold, while new investors should wait for corrections towards ₹640–₹680 for better entry opportunities.
I can also prepare a peer comparison HTML snippet against Infosys and Wipro to highlight relative strengths and weaknesses if you'd like.