Happiest Mind have fallen to a PE multiple of 47 because of the IT sector correction. With the revenue guidance of 12% growth per year and IT sector headwinds, what does the group here thinks about it’s valuations?

12% growth is just organic growth guidance, with a lot of cash on it’s book, they would go for acquisition as well which would have a multiplier effect on there growth guidance. One of the positive things about this headwind in IT sector is they could get cheap valuations for acquisition which would play out well for Happiest Mind in the long term.

I can not understand either. Everything except for that event seem to be favorable. I can not get more info about promoters, like thier background in other businesses, any integrity issues, etc… in other words, can no understand why price is still trading at lower band.

Good analysis!! Few points.

1. Does total shareholding include preferential equity to promoters?
2. PE of 30x is very high for equipment and turnkey business, given the industry is cyclical and competitive intensity coming in with Reliance and Adani foray into wind trubines. Instead of 30, if PE is 15X, then current price deosn’t offer much upside. O&M business might deserve a 20-25x multiple, but its contribution to overall profits is not significant
3. In current market, more than valuations, the bull market and trend of green energy has driven the valuations of these stocks to ridiculous levels. I would probably use simple technicals to exit the position than just based on valuation
4. At CMP, IWEL is 30-35% cheaper than inox wind, as per merger ratio

Difficult to say. If you check what happened to Equitas post-merger, IIRC there was a single day of -10% drop as all the arbitrageurs were seeking an exit when they received the bank’s shares.

In Ujjivan’s case, the arbitrageurs who got in early in UFSL were probably in a loss, and might have already exited UFSL. The arbitrage has reduced to mid-single digits which not juicy enough anyways for either fresh entry or to continue holding. So many of them could have exited already trying to avoid a month of not having shares to sell post-merger and avoiding the exit rush post-merger.

The above is just speculation on my part, no one can confirm this.

Now coming to fundamentals, I have already shared projections for Q4 and FY25. Fundamentals should support the price in FY25. Whether it will fly or crawl I do not know. The long-term story is intact, lots of things need to go right in the medium and long term for incremental shareholder value creation. These ups and downs are normal part of long term wealth creation journey, it happens in all stocks. Those who stick through may or may not get rewarded in every share. Such is investing.