Target: ₹878
CMP: ₹824
Happiest Minds’ performance for the quarter was slightly below estimates. Reported revenue of ₹420 crore (up 1.8 per cent q-o-q in INR terms, up 1.4 per cent q-o-q in USD terms). The sequential growth was led by IMSS (up 3.5 per cent q-o-q) and DBS (up 3.1 per cent q-o-q). Digital revenue increased to 96.8 per cent of total revenue vs 96.2 per cent in Q3-FY24. Headcount was down 78 QoQ to 5,168 employees. Attrition was down 90 bps QoQ to 13.1 per cent. Utilisation was down 160 bps QoQ to 75.1 per cent.
The near term demand environment remains challenging led by slowdown in discretionary tech spending. It has guided for 35 per cent to 40 per cent revenue growth for FY25 that includes significant inorganic component on account of two recently announced acquisitions, Macmillan Learning India and Puresoft Technologies.
We expect Revenue/EBITDA/PAT to grow at 26.5/31.4/34.5 per cent over FY24-FY26. We have revised up our FY25E/FY26E EPS by 0.1/4.5 per cent. We maintain Add Rating on the stock with revised target price of ₹878/share (vs ₹908 earlier) at PE of 31x on FY26E. We have reduced target PE multiple from 33.0x to 31.0x to account for weak outlook for FY25E.
