Choice International
Target:₹1,096
CMP: ₹846.75
Happiest Minds reported Q4-FY23 revenues at ₹378 crore (3.2 per cent lower than our estimates), up 25.8 per cent y-o-y and 3 per cent q-o-q. Revenue in cc grew by 1.3 per cent QoQ and 17.6 per cent y-o-y to $46 million (+1.4 per cent q-o-q and +15.2 per cent y-o-y in ₹ terms).
Ninety six per cent of the total revenue came from next-gen Digital Transformation business while 94 per cent came from Agile Business solutions. Q4 results include contribution from SMI business acquired in Jan23 (₹17.80 crore revenue contribution). Management is hinting on a good Q1 on the back of deal closures and strong pipeline.
EBIT margins for Q4-FY23 stood at 21 per cent, flat y-o-y and down 72 bps q-o-q. Margins were hit marginally because of lower utilisation level of 74.6 per cent v/s 80.1 per cent in Q3. However, company delivered a healthy EBITDA margin of 26.2 per cent exceeding its margin guidance of 22-24 per cent.
We believe company has a huge opportunity in cloud migration, modernisation of legacy applications & platforms, monetising data by building data platforms and applying analytics. We have tweaked our forecasts keeping in mind the management’s guidance and macro-economic uncertainties. We maintain our Outperform rating and ascribe a DCF based target price of ₹1,096 (implied PE of 53x on FY24 EPS of ₹20.5).