Add Happiest Minds Technologies, target price Rs 834: Centrum Broking

Centrum Broking has add call on Happiest Minds Technologies Ltd. with a target price of Rs 834.0. The current market price of Happiest Minds Technologies Ltd. is Rs 767.15 .

Happiest Minds Technologies Ltd., incorporated in the year 2011, is a Small Cap company (having a market cap of Rs 11709.93 Crore) operating in IT Software sector.

Happiest Minds Technologies Ltd. key Products/Revenue Segments include I T Enabled Services for the year ending 31-Mar-2024.


Investment Rationale
Happiest Minds reported mixed performance for the quarter. It reported revenue of Rs 4.6bn( up 11.2% QoQ, up 18.7% YoY) with the sequential growth led by contribution from two acquisitions- 1) Puresoft Technologies 2) Aureus Tech.

Around 97.4% of revenue was Digital vs 96.8% of revenue in Q4FY24. EBIT margin was down 290 bps QoQ to 13.5% on account of higher SG&A(up 18.7% QoQ), and higher D&A(up 50% QoQ). Utilization was up 310 bps QoQ to 78.2%. Headcount grew by 1,431 employees QoQ to 6,599 employees. Offshore effort mix was down 210 bps QoQ to 93.8%. Attrition was up 50 bps QoQ to 13.5%. The near term demand environment remains challenging led by softness in discretionary tech spending.

However, there are certain green shoots in the demand environment especially in the BFSI segment. It has guided for 30% to 35% revenue growth for FY25 that includes significant inorganic component on account of two recent acquisitions, Aureus Tech and Puresoft Technologies.

We expect Revenue/EBITDA/PAT to grow at 26.3%/29.5%/31.0% over FY24-FY26E. We have revised our FY25E/FY26E EPS by (12.4%)/(4.9%). We maintain ADD Rating on the stock with revised target price of Rs 834/share (vs Rs 878 earlier) at PE of 31x(unchanged) on FY26E.

Financials
For the quarter ended 30-06-2024, the company has reported a Consolidated Total Income of Rs 489.26 Crore, up 10.57 % from last quarter Total Income of Rs 442.50 Crore and up 20.95 % from last year same quarter Total Income of Rs 404.53 Crore. Company has reported net profit after tax of Rs 51.03 Crore in latest quarter.

Promoter/FII Holdings
Promoters held 44.22 per cent stake in the company as of 30-Jun-2024, while FIIs owned 5.31 per cent, DIIs 2.85 per cent.