Happiest Minds Technologies - Valuation Can Remain Elevated: HDFC Securities

HDFC Securities Institutional Equities

We met the management of Happiest Minds Technologies Ltd. and believe that the company has growth catalysts despite services being more discretionary. The company is transitioning from an EduTech-heavy portfolio to a higher mix of BFSI and Healthcare (larger spending pool and pipeline)—recent acquisitions will accelerate growth prospects in the vertical with the up-sell opportunity.

Happiest Minds reiterated its long-term ambition to reach $1 billion over the next eight years (23% CAGR including inorganic)—FY25E revenue growth outlook is 35 to 40% (including inorganic Pure Software & Aureus, implying organic at 10-15%).

Happiest Minds has recently changed its organisational structure and moved to an industry/vertical structure (Happiest Minds - Organisational rejig for better growth).

We continue to believe that the current scale of the business, the distinction in quality and the disproportionate impact from potential recovery in discretionary services in the sector can keep valuation higher than peers for Happiest Minds.

We factor U.S.D revenue growth at 34% and 26% for FY25E and FY26E respectively; factor Ebitm at 16.1% and 17.8%, translating to an earning per share compound annual growth rate of 27% over FY24-26E—maintain Add with target price of Rs 900, at 36 times FY26E earning per share.

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