Happiest Minds has strong growth potential backed by robust deal wins and superior execution capabilities. BUY for target price of Rs 1100 (25% upside)

Tepid results; Management Maintains Guidance

Est. Vs. Actual for Q3FY24: Revenue – MISS; EBITDA Margin – INLINE PAT – MISS; Deal Wins – BEAT

Change in Estimates post Q3FY24

FY24E/FY25E: Revenue 1%/1%; EBITDA Margins 1%/1%; PAT 1%/1%

Recommendation Rationale

 Long-term outlook positive: The management is very optimistic about long-term and broadbased growth across verticals, backed by resilient client engagement. However, longer holidays and ramping down in the large client account impacted the company’s revenue growth in Q3FY24.

 Strong TCV in Q3FY24: The company’s TCV across verticals and geographies stood strong in Q3FY24 at $1.5 Bn.

 Q4FY24 likely to be better: The management is confident of gaining medium to long-term demand momentum on the backdrop of the deals it has won in the previous quarters. Moreover, it expects strong revenue growth in Q4FY24, indicating better recovery in the near term. Margin expansion will be in the range of 22%- 24% for FY24.

Sector Outlook: Neutral

Company Outlook & Guidance: The management has retained its guidance of 12% growth in CC terms in FY24 along with margin expansion.

Current Valuation: 38x FY26E P/E, Earlier Valuation: 38x FY26E P/E

Current TP: 1,100/share; Earlier TP: 1,100/share

Recommendation: Given the company’s strong growth potential backed by robust deal wins and superior execution capabilities, we recommend a BUY rating on the stock.

Alternative Investment Ideas: Persistent Systems, KPIT Technologies

Click here to download Happiest Minds Q3FY24 Result Update by Axis Securities