Buy Happiest Minds; target of Rs 1125: YES Securities

YES Securities is bullish on Happiest Minds has recommended buy rating on the stock with a target price of Rs 1125 in its research report dated August 09 2023.

Broker Research

August 14, 2023 / 20:05 IST

Buy

26 Aug, 2025 12:21

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YES Securities' research report on Happiest Minds

Happiest Minds (HAPPSTMN) reported slight miss on financial performance for the quarter. Both, the sequential revenue growth and EBIT margin were below estimates. It reported constant currency growth of 3.5% QoQ(up 3.6% QoQ in USD terms, up 3.4% QoQ in INR terms), led by Edutech vertical (up 12.3% QoQ). There was sequential decline in EBIT margin(down 175 bps QoQ) led by higher cost of revenue. Employee attrition continues to decline as LTM attrition decreased by 320 bps QoQ to 16.6%. Digital accounts for 95.1% of revenue as of Q1FY24 vs 96.3% as of Q4FY23. The long term demand environment remains robust led by rapid adoption of cloud and data analytics. However, the clients especially in select sectors remain cautious regarding the evolving macroeconomic situation and it has led to near term moderation in revenue growth. The deal pipeline remains strong and it supports revenue growth visibility. Management guidance of revenue growth of 25% in cc terms for FY24 with EBITDA margin band of 22-24% remains strong. Falling employee attrition is expected to support operating margin going ahead. We estimate revenue CAGR of 23.2% over FY23‐25E with average EBIT margin of 21.0%.

Outlook

We maintain our BUY rating on the stock with revised target price of Rs 1,125/share based on DCF methodology. The stock trades at PER of 48.7x/37.5x on FY24E/FY25E EPS.

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