Add Happiest Minds Technologies, Target Price Rs 834: Centrum Broking
Happiest Minds Technologies Ltd., founded in 2011, is a small cap company (with a market capitalization of Rs 11709.93 crore) operating in the IT software sector.
Happiest Minds Technologies Ltd.’s key product/revenue segments include IT-enabled services for the year ending March 31, 2024.
Reasons for investment
Happiest Minds reported mixed results for the quarter. The company reported revenues of Rs 46,000 crore (up 11.2% QoQ, up 18.7% YoY), with sequential growth due to contribution from two acquisitions: 1) Puresoft Technologies 2) Aureus Tech.
Digital accounted for approximately 97.4% of revenue, up from 96.8% of revenue in Q4FY24. EBIT margin decreased 290bps QoQ to 13.5% due to higher SG&A expenses (up 18.7% QoQ) and higher depreciation and administrative expenses (up 50% QoQ). Utilization increased 310bps QoQ to 78.2%. Headcount increased by 1,431 employees QoQ to 6,599 employees. Offshore expense mix decreased 210bps QoQ to 93.8%. Attrition increased 50bps QoQ to 13.5%. The near-term demand environment remains challenging due to weakness in discretionary technology spend.
However, there are certain positive developments in demand, especially in the BFSI segment. Revenue growth is forecast at 30-35% for FY2025, which includes a significant inorganic portion due to the two recent acquisitions, Aureus Tech and Puresoft Technologies.
We expect revenue/EBITDA/PAT growth of 26.3%/29.5%/31.0% in FY24-FY26E. We have revised our EPS for FY25E/FY26E by (12.4%)/(4.9%). We maintain ADD rating on the stock with a revised price target of Rs 834/share (versus Rs 878 previously) at a P/E of 31x (unchanged) in FY26E.
Finance
For the quarter ended 30.06.2024, the company reported consolidated total income of Rs 489.26 crore, up 10.57% over last quarter’s total income of Rs 442.50 crore and up 20.95% over the same quarter last year’s total income of Rs 404.53 crore. The company reported net profit after tax of Rs 51.03 crore in the last quarter.
Organizer/FII Holdings
The promoters held 44.22 percent stake in the company as of June 30, 2024, while FIIs owned 5.31 percent and DIIs 2.85 percent.
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