Buy Happiest Mind Technologies; target of Rs 1158: KR Choksey

The research firm ICICI Securities believes earnings of apparel brands and retail companies under their coverage may surprise positively from Q3FY22E as the likely demand recovery may result in better than expected margin performance. Some of the costs savings achieved during pandemic may sustain and coupled with high operating leverage may lead to higher than pre-covid margins from Q3FY22E.  Stocks like Trent, V-Mart and Aditya Birla Fashion and Retail are the preferred picks backed by their strong and consistent track record of execution.

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KR Choksey's research report on Happiest Mind Technologies

Happiest Minds Technologies Limited (HAPPSTMN) Q1FY23 performance beats our estimate. Dollar Revenue was up 5.5% QoQ to USD 42.2Mn (KRChoksey est. USD 41Mn). Rupee revenue grew by 9.4% QoQ to INR 3,289Mn (KRChoksey est. INR 3,189Mn). Reported operating margin stood at 22.7% QoQ due to lower utilization (down ~30bps QoQ). Reported Net profit grew by 8.1% QoQ to INR 563Mn (KRChoksey est. INR 558Mn) with margin of 17.1% due to lower other income. 97% of the total revenue comes from Digital business and Agile contributes +93% of the total revenue. We believe that recent intake of fresher (Aug intake), continuous investments in facility addition across India along with ongoing talent crunch, supply side challenges, wage hikes, increasing sub-contracting costs and higher intake of fresher will keep margins under check in the near term. Growth was broad based across the US (Contri.|66.6%, up by 7.3% CC QoQ) and Europe (Contri.|10.7%, up by 8.9% CC growth) and mainly driven by Edu-Tech (Contri.|23.7%, up 6.3% CC growth), BFSI (Contri.|13.7%, up 5.8% CC growth) and Industrial (Contri.|8.2%, up 31.5% CC growth). Our target price of INR 1,158 is based on ~63x Mar-24E EPS with EPS CAGR of 22% over FY22-24E.

Outlook

We reduce our target price to INR 1,158 (Previous Target price of INR 1,300) based on a P/E multiple of 63x to the FY24 estimated EPS of INR 18.4 and hence we maintain our target price with “BUY” rating.

More Info

At 17:30 Happiest Minds Technologies Ltd. was quoting at Rs 998.05, up Rs 28.65, or 2.96 percent.

It has touched an intraday high of Rs 1,032.95 and an intraday low of Rs 986.50.

It was trading with volumes of 119,003 shares, compared to its thirty day average of 123,237 shares, a decrease of -3.44 percent.

In the previous trading session, the share closed up 6.24 percent or Rs 56.95 at Rs 969.40.

The share touched its 52-week high Rs 1,568.00 and 52-week low Rs 785.55 on 15 September, 2021 and 20 June, 2022, respectively.

Currently, it is trading 36.35 percent below its 52-week high and 27.05 percent above its 52-week low.

Market capitalisation stands at Rs 14,657.72 crore.

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Happiest Minds Technologies - 230722 - kr