Happiest Minds Q3 Results Review - Tepid; Management Maintains Guidance: Axis Securities

Axis Securities Report

In Q3 FY24, Happiest Minds Technologies Ltd. reported revenue of Rs 410 crore, up 0.8% QoQ and 11.7% YoY. This was below our expectations owing to ramp down of large client account.

The company’s operating profit stood at Rs 1,05 crore, reporting a flattish growth of 0.4% on a QoQ basis.

This was largely on account of lower overall demand in the majority of its operating regions. Its net profit for Q3 FY24 stood at Rs 60 crore, registering a growth of 2% QoQ.

Outlook

From the long-term perspective, we believe Happiest Minds is well-placed to deliver encouraging growth, given its multiple long-term contracts with the world’s leading brands.

Richer revenue visibility gives us confidence in its business growth moving forward.

Valuation and recommendation

We recommend a 'Buy' rating on the stock and assign a 38 times price/earning multiple to its FY26E earnings of Rs 30/share to arrive at a target price of Rs 1,100/share, implying an upside of 25% from the current market price.

Key risks to our estimates and target price

• The demand environment is uncertain on account of the potential threat of recession in the world’s largest economies.

• The rising subcontracting cost and cross-currency headwinds may impact the company’s operating margins negatively.

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