Happiest Minds Technologies surges 14%, hits new high amid heavy volumes

Brokerage Nomura initiate coverage on Happiest Minds Technologies with a 'Buy' rating and target price of Rs 480 per share

Shares of Happiest Minds Technologies hit a new high of Rs 461.90 as they surged 14 per cent on the BSE in intra-day trade on Wednesday on the back of heavy volumes in an otherwise weak market.

At 01:05 pm, the stock of IT consulting & software company was trading 12 per cent higher at Rs 453, as compared to a 0.67 per cent decline in the S&P BSE Sensex. The trading volumes on the counter more-than-doubled with a combined 8.04 million equity shares changing hands on the NSE and BSE.

In the past seven trading days, the stock has rallied 33 per cent after its net profit nearly doubled to Rs 42.15 crore in the December quarter (Q3FY21), against Rs 21.38 crore in the year-ago quarter. Revenue grew 14.6 per cent year-on-year (YoY) to Rs 201 crore from Rs 176 crore in the previous year quarter. In US dollar terms, revenue grew YoY by 8.8 per cent and sequentially by 6 per cent.

Earnings before interest, taxes, depreciation, and amortization (EBITDA) more-than-doubled to Rs 59.69 crore from Rs 6.06 crore. EBITDA margin improved 1,364 basis points (bps) to 29.7 per cent from 16.0 per cent.

The management said the company has a strong deal pipeline on the back of increasing market demand. Last month, the company had acquired US-based Pimcore Global Services to strengthen its presence in digital commerce.

Happiest Minds Technologies is led by its executive chairman, Ashok Soota, and a credible team with around 1-2 decades of experience in IT services that have held leadership roles and P&L responsibility at larger peers like Wipro, Mindtree, EDS and MuSigma.

The brokerage firm Nomura initiated coverage on Happiest Minds Technologies with a ‘Buy’ rating and target price of Rs 480 per share. While the recent run-up in the stock is likely to limit the upside in the near term (2.5x of the IPO price), we like the stock as we see it as a ‘consistent compounder’, the brokerage firm said.

“We expect Happiest Minds to trade at a premium as we think it will continue to grow at around 2x the pace of large-caps and around 1.5x of midcaps, led by the presence in digital; we like the stickiness offered by PES and scalability offered by DBS/IMSS; and we factor in its ability to sustain earnings before interest and tax (EBIT) margins, similar to mid-caps (despite being 1/10th their size),” analysts said in the initiate coverage report.