We believe the stock is currently overvalued and is trading above its fair value. Also, the stock is currently trading at P/E of 135 which is much higher than its peers and industry P/E of 33, suggest experts.
Since its listing, Happiest Minds Technologies Ltd has been treading new highs. The stock has delivered 4x returns on a year-to-date basis and in July alone, it has surged about 50 percent.
The stock has been on buyers’ radar since listing and has been hitting fresh highs on a consistent basis. In fact, the stock recently claimed its all-time high of Rs 1580 on 16 July, 2021.
Despite the sharp run up, experts feel that the bull run is not over, but could face near term headwinds. Risk averse investors booking partial profits will be an ideal strategy.
Happiest Minds has posted a significant rally after the company announced that it is among India’s top 25 best companies to work for in 2021 in June.
This award was announced by the Great Place to Work Institute, where Happiest Minds was ranked 21 in the largest workplace culture study in the country.
The company came up with robust results for the previous quarter where margins expansion was led by revenue growth, better utilization and realization, and lower attrition at Happiest Minds.
“The reason behind the sharp rally is its continued growth is the optimism shown by its management. The company believes that sales will improve further this year, leading to higher profits and revenue. With its focus on cloud and cloud-based computing businesses its outlook seems to be optimistic,” Likhita Chepa, Senior Research Analyst at CapitalVia Global Research, said.
“After posting a stellar rally in the recent trading sessions, the valuations appear heated for the short-term and therefore one can expect a healthy correction in the near term. The stock is likely to face resistance at 1730 and the support is placed at 1130,” she added.
How the stock is placed technically?
Happiest Mind has witnessed a big surge since listing and has already given multibagger returns. There is a high demand for quality IT stocks.
The pedigree of promoters, growth potential of business has ensured continued investor interest in the stock, suggest experts.
“At 1580, Happiest Mind has touched an important milestone, having touched a crucial Fibonnacci level with respect to its previous rallies seen earlier in Feb from 340 to 585. It seems that the stock could find it difficult to penetrate this level easily in the near term. 1580 is expected to act as strong resistance,” Nirav Vakharia, Technical Analyst, Green Portfolio, said.
“Some correction in the form of profit booking can be seen over next few weeks. On the lower side, strong support can be seen at 1300 n 1200 levels. It seems that over the next few weeks, it could play out a quiet, corrective move to test support levels mentioned,” he said.
Vakharia further added that the quantum of correction would decide the next target. However, as per Fibonacci calculations, a level of 2040 can be projected as the next target. We advise buying in a staggered manner inside the 1300 to 1200 range.
What should investors do?
For someone who missed the opportunity to invest in the stock should wait for a dip as the stock is trading near crucial resistance levels. Going by valuations, the stock looks slightly overvalues and is trading above the fair value.
Investors holding the stock can look at booking profits while fresh money can be deployed on dips, suggest experts.
“Based on our analysis, we believe the stock is currently overvalued and is trading above its fair value. Also, the stock is currently trading at P/E of 135 which is much higher than its peers and industry P/E of 33,” Mohit Nigam, Head, PMS – Hem Securities, said.
“We recommend to book profits in the 1500-1550 range and add the stock around 1200 which is a crucial support. As a disclosure, we had this stock in our PMS. We booked profits & have completely exited the same. Fundamental view on the company is still positive but we feel that valuations are pretty stretched,” he said.
Chepa of CapitalVia Global Research also suggested investors to look at buying the stock on a dip. “Although the stock poses a good long-term investment option, it is advisable for investors to wait for a correction before placing their bets as the IT space has witnessed a sharp rally on the back of strong earnings expectations,” she added.
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