Accumulate Happiest Minds Technologies; target of Rs 891: KR Choksey

KR Choksey's research report on Happiest Minds Technologies

In Q4FY24, HAPPSTMNDS reported a revenue of INR 4,173 Mn (+1.8% QoQ). The revenue missed our estimates due to lower revenue growth in EduTech and manufacturing verticals. EBIT missed our estimates despite the Company posting an EBIT of INR 683 Mn (+3.4% QoQ). The miss in estimates can be attributed to higher associated costs and higher employee expenses. The Company reported an adj. profit of INR 590 Mn (-0.8% QoQ) missing our estimates due to higher-than-expected taxes amid gains on exceptional items. Adj. PAT Margin declined to 14.1%, down -14bps QoQ and down 111 bps YoY. We lower our FY26E EPS as we believe that the synergies from the recent acquisitions would take time to fructify. The lowered valuation multiple and target price reflect the results of disappointment over the past few quarters. We downgrade our rating to “ACCUMULATE” from “BUY”.

Outlook

Accordingly, we apply a P/E multiple of 36x (previously: 40x) on FY26E EPS and arrive at a reduced target price of INR 891 per share (previously: INR 1,040). We also downgrade our rating on the stock to “ACCUMULATE” from “BUY”.