Posting my detailed analysis for the first time, would love to hear thoughts/feedback from this group about my views.

Q2 FY 2024 and Q3 FY 2024 Notes:

• Happiest Mind changed the outlook for the year from 25% to 12%. Interesting thing is they have mentioned 12% as the organic growth only and they are having weekly/bi-weekly discussions about acquisitions with list of candidates. So, if any acquisition happens, it will add on to the revenue growth, however, for FY2024, even if the acquisition happens tomorrow, there wouldn’t be any substantial revenue addition for FY2024, so 12% growth should be the guidance.
• Created a new vertical called Gen AI Business Unit (GBS) which would take advantage of the current AI boom that IT industry is seeing. Currently, in talks with multiple clients for AI use cases in their respective company. No targets for revenue has been set for this vertical for current year, this should start picking up in next financial year, so they will report numbers from thei vertical from next financial year.
• Due to delay in interest rate cut by Feds and high inflation scenario, there clients are cautious while spending money and are taking time in making decisions.
• In order to meet 12% growth guidance for this year, they still need to have a good next quarter and they are confident they should be able to do it.
• After the creation os new Business Unit, they have 3 divisions now. TBD: Revenue from all 3 divisions?
  • Product and Digital Engineering Services (PDES)
  • Infrastructure & Management Security Services.
  • Generative AI Business Unit (GBS)
• Whenever the industry goes back to normal, they are greatly poised to take advantage of it.
• Happiest Mind have still increased there headcount even after this uncertainity, they got around ~230 college hires and also gave pay hikes to there employees when some of the other Indian IT companies have not done that.
• Ashok Soota has sold a small amount of stake to fund his charitable organization.
• They are still confident about there margin guidance of 22%-24%.
• They will be hiring sales head for US to boost sales growth from US.

In order to understand more about the demand outlook for Happiest Mind, I looked at EPAM earnings call and this is what EPAM CEO said. “Because of our ability to adapt to new client demands and market conditions, we are optimistic about the opportunities ahead of us toward the end of 2024. Demand to build postponed during the last two years should rebound, driven by long-term pressures for legacy modernizations, by needs for advanced customer-centric solutions, and by the massive interest to understand how to apply GenAI and general AI capabilities to build new platforms and solutions”
He expects the demand outlook to return to 2022 levels by H2 2024.

My viewpoints for Happiest Mind:

• Happiest Mind revenue will struggle for atleast next couple of quarters due to demand outlook, however, demand should rebound in late 2024 or early 2025 because of the factors that EPAM CEO mentioned as well as Fed interest rate cuts which should be on the cards.
• Ashok Soota has already seen these circumstances a lot in his career during dot com bubble, 2008 crash, etc, so he knows how to recover from it. His guidance would be helpful for the management.
• I expect the future growth to come from GBS unit which most of the companies are looking to adopt. It is not new for Happiest Mind to work on new technologies since they adopted IoT technology much early in Indian IT space in 2015, so I expect them to grow substantially on this space.
• PE ratio of 46 does not make sense for a company with 12% growth outlook and future outlook being unknown. So, valuation becomes a key to get long term profit here.
• Happiest Mind management in one of the interviews was confident about 25% growth outlook even after EPAM cuts its growth guidance, however, in next quarter concall, they slashed the revenue guidance. So this tells me the management does not have visibility for atleast couple of quarters. However, I got the same feeling when I heard EPAM earnings call, so it seems like all the industry participants does not have visibility for next couple of quarters.

Conclusion:
With good management running the show and they working on newer technologies like Gen AI, it seems they are rightly placed to gain market share in digitization and GBS unit which should boost there revenues once demand outlook stabilizes. However, PE of 46 is a bit high for long term entry position. EPAM has a PE of ~30 but with there high base they might not be able to grow as rapidly as Happiest Mind. What does thie group think the right valuation is for Happiest Mind?

Disc: Have a small tracking position in Happiest Mind but want to add more at right levels.

Hi @Cshar

Have you made any modification to your portfolio by taking advantage of this correction? How is the portfolio composition now?

Thanks

Hi sir, I always like your detailed write-up. I hold couple of corporate bonds as well, when I’m trying to sell now, the platform (goldenpi) is offering lower rate… Placed request on IndiaBonds website as well, but no response from them. Not sure, it’s because I hold smaller quantities. Which platform,you suggest for selling the bonds ? or any other alternative?

Thank you !!

PS: I bought the bond during dec 2020, when the internet rate was lower… but I see the difference between the goldenpi offered rate to buy is 8 percent lower from my buying price.
Bond details: INE683A08036

Is it bad for indian shrimp companies, or favourable as it makes attempt to make level playing ground for India against Eucador due to higher CVD on Eucador. @harsh.beria93 @Tar @Chins

Above calculations are not correct, for every 300 MW order, order value is close to 150 Cr with 50 cr as crane rental. Refer to my message on 7th Jan, stock was trading at 800 levels and three months returns are more than 60%.