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Our Rating: OBSERVE & HOLD
Mehabe score: 6 G Factor: 3 Piotski Score: 6 The stock has a rating OBSERVE & HOLD. The mehabe team score is reflective of its fundamental and technical merits. A rating above 8 is considered good buy. The stock has a G-Factor of 3 and Piotski score of 6.
Description
Happiest Minds founded in 2011 is headquartered in Bangalore, with operations in the U.S, UK, Canada, Australia and Middle East.
It is an IT company, ranked 4 in IT Services which works on disruptive technologies such as artificial intelligence, blockchain, cloud, digital process automation, internet of things, robotics/drones, security, virtual/augmented reality, etc.
Received a 4.2 rating by Glassdoor. Number 2 in IT services companies.
Ashok Soota the executive chairman of the company is the main promoter and was earlier Founding Chairman & MD of MindTree, prior to MindTree, he led Wipro’s IT business for fifteen years
Main Points
IPO
Launched in September 2020 at 166 per share.Site:HAPPSTMNDS
Market Cap:
Rs 13,766 cr
Price:
937.0
Trading pe:
85.0x
Book-value:
37.2/share
Div yield:
0.32 %
Earning yield:
1.39%
Face-value:
2.00/share
52week high:
954.65
52week low:
285.55
Technical Analysis
Stock trades at 937.0, above its 50dma 751.76. It also trades above its 200dma 534.26. The stock remains bullish on techicals
The 52 week high is at 954.65 and the 52week low is at 285.55
Price Chart
P/E Chart
Sales and Margin
Strengths
– has delivered good profit growth of 114.50% CAGR over last 5 years
– has a good return on equity (ROE) track record: 3 Years ROE 49.42%
Weakness
– Stock is trading at 25.18 times its book value
-Tax rate seems low
Competition
– The industry trades at a mean P/E of 32.1x. Happiest Minds trades at the industry’s max P/E of 85.01x. HAPPSTMNDS trades at a P/E of 85.0x
– Industry’s mean G-Factor is 3.9 while the mean Piotski score is 9.0. HAPPSTMNDS has a G-Factor of 3 and Piotski scoreof 6.
– Average 1 month return for industry is 13.3%. The max 1- month return was given by Happiest Minds: a return of 28.66 %
Quarterly Results
Sales for period ended Mar 2021 is Rs 208.0 cr compared to Rs 186.0 cr for period ended Mar 2020, a rise of 11.8%
Operating Profits reported at Rs 55.0 cr for period ended Mar 2021 vis-vis 21.0 for period ended Mar 2020 .
Operating Margins expanded 1515.2 bps for period ended Mar 2021 vis-vis Mar 2020 .
The EPS for Mar 2021 was Rs 2.51 compared to Rs 2.87 for previous quarter ended Dec 2020 and Rs 0.0 for Mar 2020
Profit & Loss Statement
Profit&Loss Comments
Company reported sales of Rs 761.0 cr for period ended Mar 2021 vis-vis sales of Rs 698.0 cr for the period ended Mar 2020, a growth of 8.3%. The 3 year sales cagr stood at 19.7%.
Operating margins expanded to 25.0% for period ended Mar 2021 vis-vis 14.0% for period ended Mar 2020, expansion of 1100.0 bps.
Net Profit reported at Rs 162.0 cr for period ended Mar 2021 vis-vis sales of Rs 73.0 cr for the period ended Mar 2020, rising 0%.
Balance Sheet Statement
Cash Flow Statement
Cash Flow comments
CashFlow from operating activities was positive.
CashFlow from operating activities: Rs 150.0 cr for period ended Mar 2021 vis-vis Rs 0.0 cr for period ended Mar 2020
Sales Growth
Profit Growth Statement
Profit Growth Statement
Stock Price CAGR
Return of Equity
General Comments
– The company has worsened on its Return on Equity (RoE) metric. The RoE on Last Year basis was 40.0% compared to 49.0% over the last 3 Years. – The stock has given a return of % on a 1 Year basis vis-vis a return of % over the last 3 Years. – The compounded sales growth on a TTM bassis is 9% vis-vis a compounded sales growth of 20% over the last 3 Years. – The compounded profit growth on a TTM basis is 92% vis-vis a compounded profit growth of 109% over the last 3 Years.
Ratios
Shareholding Pattern
– FII shareholding has remained largely constant. The Mar 2021 fii holding stood at 7.07% vis-vis 7.51% for Dec 2020 – Public shareholding has remained largely constant. The Mar 2021 public holding stood at 32.3% vis-vis 32.88% for Dec 2020
Conclusion
– has delivered good profit growth of 114.50% CAGR over last 5 years
– has a good return on equity (ROE) track record: 3 Years ROE 49.42% – Stock is trading at 25.18 times its book value
-Tax rate seems low
Fundamentally, the stock remains weak on business fundamentals. Weak near term results have dampened and questioned business drivers. We suggest to wait for a upturn in business performance.
Technically, the stock trades above its 50 DMA 751.76 and is trading at 937.0 It has shown near term bullish momentum contrary to business fundamentals. We suggest to observe price action. However as investors, who like to avoid timing the markets, we suggest to avoid the stock
