Happiest Minds Technologies Ltd. share price target

Happiest minds (HM) reported 3.6% QoQ USD, 3.5% QoQ CC, revenue growth, slightly lower than our estimate of 4% QoQ CC. On a YoY basis, growth was 12.7% YoY USD (7% organic). EBIT margin came in at 19.2% (-175bps QoQ), below our estimate of 21.1% due to higher employee costs attributable to slight increase in onsite employee mix and campus joinee related costs.

Happiest Minds Technologies Ltd. aims to employ around 1,300 people in the company. The company plans to invest heavily for the next 2-3 years in innovative technologies like Generative AI, Chat GPT, Metaverse, Web 3.0, AI, Low-Code/No-Code Applications and Quantum Computing.

As per HM management, the areas on which HM is working for its clients are non discretionary in nature. HM is working on core part of clients’ technology which the clients use to deliver their services or engage with their customers, or provide services
to their employees.

HMTL had generated a revenue of INR 3779.8 mn, registering a healthy growth of 25.75% on a YoY basis and 3.02% on a QoQ basis. Out of this total revenue, 49.4% comes from Product Engineering Services(PES), 28.9% from Digital Business Solutions (DBS), 19.5% from Infrastructure Management and Security Services(IMSS) and 2.2% from other sources.

Happiest Minds Technologies’ reported revenue of USD 45.4 million in Q3Fy23 with a growth of 2.1% on a QoQ basis and 26% on a YoY basis. The revenue in constant currency grew by 2.8% on a QoQ basis and 22.6% on a YoY basis. The total income is INR 37,46.8 million, a growth of 4.3% on a QoQ basis and 28.2% on a YoY basis. The EBITDA has increased to INR 9,72.6 million, a growth of 3.1% on a QoQ basis and 26.5% on a YoY basis.

Happiest Minds Technologies Limited (HAPPSTMN) Q2FY23 performance is marginally lower than our estimate.

We initiate coverage on Happiest Minds Technologies (HAPPSTMNDS) and assign an
ADD rating with a DCF-based target price of Rs1,075, assuming 25% revenue CAGR over FY22-FY32E, 20% EBIT margin, terminal growth rate of 6.5% and WACC of 11.5%.