KR Choksey has given Accumulate recommendation for Happiest Minds Technologies with a target price of Rs. 1510 in its research report issued on Oct 28, 2021

KR Choksey’s research report on Happiest Minds Technologies

Happiest Minds Technologies Limited (HAPPSTMN) Q2FY22 performance beats our estimate. Dollar Revenue was up 7.8% QoQ to USD 35.8Mn (KRChoksey est. USD 35Mn). Rupee revenue grew by 8.1% QoQ to INR 2,645Mn (KRChoksey est. INR 2,567Mn). Reported operating margin contracted by 59bps to 19.7% QoQ due to supply crunch and rising attrition as we see a sharp uptick in employee cost, up by ~10.1% QoQ. Reported Net profit grew by 6.2% QoQ to INR 444Mn (KRChoksey est. INR 5848Mn) with margin of 16.8% due to lower net operating income. 97% of the total revenue comes from Digital business and Agile contributes 93% of the total revenue. The ongoing talent crunch will keep margins under check in the near term, offset by higher offshoring, utilization and operating leverage. Growth was broad based across the US (+5% QoQ and India (+13.2% QoQ) and mainly driven by BFSI (+7.2%QoQ), Retail (+19.2% QoQ) and Manufacturing (+42.3% QoQ). Our target price of INR 1,510 is based on 90.5x Mar-24E EPS with EPS CAGR of 15.6% over FY22-24E.


Happiest Minds is currently trading at a valuation with a P/E multiple of 85.5x/77.7x on FY23E/FY24E earnings. We expect strong deal momentum across verticals, full focus on digital business especially in analytics and cyber security segment along with clients centric approach will aid growth over the medium to long term in future and hence we are assigning a P/E multiple of 90.5x to the FY24 estimated EPS of INR 16.7 to arrive at a target price of INR 1,510 per share with an upside of 16.4% over the CMP. Accordingly, we maintain our view to an “ACCUMULATE” rating to the stock.

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