Choice Equity Broking has suggested BUY Call for Happiest Minds Technologies, targeting a price of Rs 670 – an anticipated upside of approximately 30% from the current Rs 515. The research follows the company’s latest Q2FY26 performance, highlighting resilient revenue growth, robust traction in its Generative AI initiatives, and an ongoing strategic transformation. The report, underscored by a balance of optimism and realism, guides investors through earnings momentum, margin pressures, business unit dynamics, and valuation insights, while laying out actionable levels and risk elements for discerning market participants.

Happiest Minds Technologies Remains Strong Value Creator for Investors

Choice Equity Broking’s BUY call signals confidence in Happiest Minds’ transformation, despite near-term margin moderation. The firm recommends investors look for an upside to Rs 670, anchored on GenAI business acceleration and high-value client additions. Investors are urged to focus on operational discipline and evolving sector trends as key catalysts.

Q2FY26 Snapshot: Performance and Growth

Happiest Minds reported Q2FY26 revenue of Rs 5,735 Mn, up 4.3% QoQ and 10% YoY, signifying continued momentum despite macro-led headwinds. EBIT for the quarter hit Rs 764 Mn, registering a 6.7% sequential increase, with margin expansion fueled by operational efficiencies. However, PAT dipped by 5.4% due to lower investment income, reflecting transient headwinds that management is addressing.

The company has now achieved 21 consecutive quarters of sequential revenue growth since its IPO, reinforcing the sustainability of its business model. The Generative AI business unit drove 77.8% YoY growth, exemplifying rapid digitalization and new client adoption. Notably, 13 new clients were added in the last quarter, boosting active client count to 290.

Strategic Investments Drive Structural Shifts

Recent acquisitions of Aureus and Pure Software have generated significant cross-selling synergies, especially in security, data analytics, and GenAI. The integrations have increased the company’s BFSI revenue share and enabled deployable platforms like Arttha Banking and Insurance-in-a-Box in new global segments.

Organizational changes, including Joseph Anantharaju’s elevation to Co-Chairman and CEO, have instilled greater agility and an AI-first mindset across management layers. These initiatives are credited with fortifying client engagements and enhancing long-term execution capability.

Segment and Geography Mix: The Winning Formula

Among verticals, BFSI, retail, healthcare, and hi-tech outpaced expectations, posting robust double-digit growth, while education tech remained a drag. In terms of geography, North America’s revenue mix has declined modestly, with Europe and Rest of World picking up pace – reflecting the company’s strategic push for geographic diversification.

GenAI business remains the growth engine, with current projects fetching a premium of 20-25% over standard IT rates – a testament to the value recognized by customers.

Operational Metrics and Margin Outlook

EBITDA margin for Q2FY26 stood at 17.2%, up 20 bps QoQ, with improved employee utilization (80.7%) and a rising share of fixed-price projects. Attrition dropped to 17.4%, reinforcing improved employee engagement and continuity.

Despite wage hikes and ongoing investments in GenAI, management maintains its EBITDA margin guidance at the lower end of the 2022 target band, thanks to productivity initiatives and better utilization.

Forecast, Valuation, and Key Levels for Investors

Choice Equity Broking projects a compound annual revenue growth rate (CAGR) of 14.3% and PAT growth at 25.9% over FY25-FY28E. The revised target of Rs 670 (down from Rs 730) is based on a 30x PE of FY27E/FY28E average EPS (Rs 22.3). The current valuation remains attractive relative to projected growth, underpinning the BUY call.

Key support and resistance levels: Immediate support at Rs 486; Target for investors set at Rs 670, with a potential upside of 30.8% over the coming year.

HTML Table: Key Financials and Ratio Highlights

Risks, Uncertainties, and Investor Guidance

The primary risks facing Happiest Minds include margin pressures from wage inflation and sustained investments in new technologies, alongside the execution risks relating to new client ramp-ups. Currency volatility and unforeseen macroeconomic shocks may also act as spoilers in the short term.

Investors are advised to monitor quarterly execution on GenAI revenues and margin discipline closely, as these will determine the trajectory toward or beyond the Rs 670 target.

Bottomline: Navigating the Opportunity in Technology Space

For equity investors, the current levels in Happiest Minds present a compelling entry point based on long-term digital transformation and GenAI monetization themes. While margin volatility may resurface, the structural growth narrative and premium client exposure keep the stock prominently poised for rerating, making a BUY stance reasonable for patient capital.