Feb 21, 2013, 12.49 PM | Source: Moneycontrol.com
Emkay Global Financial Services is bullish on CRISIL and has recommended accumulate rating on the stock with a target price of Rs 1050 in its February 19, 2013 research report.
, Emkay Global Financial Services |
"CRISIL's Q4CY12 revenue came in lower than expected at Rs2.6bn (20.2%yoy growth, - 3.4%qoq) as against our expectation of Rs2.9bn. Revenue for the quarter also includes coalition numbers, adjusted for the same the revenue growth would have been in the range of 7-9%yoy. While rating revenues were slightly lower than expected at Rs1.0bn (19.2%yoy; -1.6%qoq), research revenue was significantly lower at Rs1.45bn(24.7%yoy; -4.9%qoq) as against expectation of Rs1.63bn. As new debt issuances as well as bank credit remain poor, rating revenue continue to remain under pressure as expected, however as one big project got completed during the quarter, research revenues also dipped by 5%qoq.
CRISIL's operating margins contracted by 215bps to 34% primarily led by 407bps contraction in margins in the research business. While the opex in the research business grew by just 1%qoq, it was 5% decline in research revenues which attributed to the sharp fall in margins. Other business segments of rating and advisory witnessed improvement of 121bps/ 321bps qoq in margins. Resultantly operating profit (adjusted for Fx gain of Rs40mn) declined by 9.1%qoq to Rs888mn.
CRISIL has reported FX gain of Rs40mn during the quarter on its FX receivables driven by ~4.5% depriciation in INR vs. USD and GBP. Driven by the FX gain, the net profit for Q4CY12 remained flat sequentially at Rs600. However, adjusted for FX gain, the net profit would have declined by 11.2%qoq to Rs573mn.
While the rating business continue to remain under pressure amid dull debt market activity and poor credit offtake, research revenue also got impacted during the quarter as one of the big project got over during the quarter. However we are quite confident of research business growing at 30% in CY13 as well, on back of organic and inorganic (CDL) client acquisitions. At CMP the stock trades at 24.8x CY13 EPS and 21.1x CY14 EPS with cash per share of 48/64 for CY13/14E. We continue to maintain Accumulate rating with price target of 1050," says Emkay Global Financial Services research report.
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