6 reasons why Yes Securities initiates buy rating on Happiest Minds Technologies

Happiest Mind's strong revenue growth outlook, along with its superior margin profile, makes it a credible player in the IT services space.

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26 Aug, 2025 12:21

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Yes Securities has initiated buy rating on Happiest Minds Technologies Ltd and given target price of Rs 1,018 a share, up 27% percent from its current market price. The brokerage firm gives six reasons to buy the stocks.

The brokerage firm says the IT company expects 20%+ revenue growth, driven by 97% of revenue from digital business. Despite short-term challenges due to macroeconomic issues, the long-term demand for digital technologies remains robust.

The next reason is with a strong focus on digital business and a high offshore workforce (96%), the company aims to achieve a 20%+ EBIT margin despite being smaller than other Tier 2 IT firms. The company predicts despite recent increases in expenses, it will see a decline in employee attrition and positive operating leverage, along with an improved employee pyramid, which will support its operating margin soon.

The brokerage says that the company operates in three business units: Product Engineering Services (47.7% of revenue), Digital Business Services (30.7% of revenue), and Infrastructure Management and Security Services (21.6% of revenue). While PES provides access to clients, DBS and IMSS offer scalability and annuity revenue streams. The company's presence in all three segments creates cross-sell opportunities.

The company has a diversified revenue base across industry verticals and geography. As of third quarter of FY23, revenue is spread across EduTech (23.2%), Hi-Tech (15.7%), Travel, Media & Entertainment (13.1%), BFSI (10.3%), Retail (10.4%), Manufacturing (10.0%), and Other (8.2%). The company derives 67.5% of its revenue from the US, 15.4% from India, 9.4% from Europe, and 7.7% from the Rest of the World.

The company has a strong promoter with a 53% holding, led by the experienced founder Mr. Ashok Soota, who also founded MindTree and served as vice chairman at Wipro. The company's prudent capital allocation is reflected in its Return on Equity of around 30%, reasonable DSO of 60 days, and robust free cash flow conversion.

Lastly, Happiest Mind's strong revenue growth outlook, along with its superior margin profile, makes it a credible player in the IT services space. It is currently trading at a PE of 31.7x on FY25E, and revenue/EBITDA/PAT is expected to grow at a CAGR of 26.7%/27.1%/27.1% over FY22-FY25E, Yes Securities said.