Target: ₹790
CMP: ₹667.65
Happiest Minds is a niche product engineering-focused IT services company with 6,600+ employees and diversified verticals spanning BFSI, healthcare, edutech, etc.
FY25 was transformational for the company, as it leveraged on inorganic growth to significantly alter its business mix towards BFSI and healthcare: Deployed $90 million for acquisitions of PureSoftware, Aureus & Middle East business of GAVS Tech, with $45 million to be deployed in earn-outs. Its FY25 revenue is $244 million, EBITDA margin 17.2 per cent
Inorganic growth driving improved business mix towards BFSI and healthcare (about 42 per cent of revenue in Q4 FY25 vs. 27.5 per cent in Q4 FY24); Verticalised organisational structure to improve client mining and drive sales efficiency; Appointment of CGO to help in net new client opportunities and drive cross-sell across business units; the dedicated AI business unit reinforces the company’s commitment to leverage AI for winning deals.
We apply ~35x P/E multiple (about 40 per cent discount to 5 year average of about 57x) to FY27e adjusted EPS of ₹22.7, intrinsic value works out to ₹802; Basis DCF, our intrinsic price works out to ₹779; and our TP is ₹790 (implying a 31.5 per cent upside from the current price), basis 50 per cent weight each to DCF and the multiple method.
US slowdown and slowdown in Edutech vertical are key risks.