Accumulate ICRA: PPFAS Research

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Accumulate ICRA: PPFAS Research

Parag Parikh Financial Advisory Services (PPFAS) is bullish on ICRA and has recommended accumulate rating on the stock, in its February 08, 2012 research report.

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Parag Parikh Financial Advisory Services (PPFAS) is bullish on ICRA and has recommended accumulate rating on the stock, in its February 08, 2012 research report.

"ICRA has reported a strong set of numbers for the quarter ended December 2011 lead by an impressive rating service's 23% Y-Y growth. Though debt issuances remain sluggish & also the growth in resource mobilisation is slow on account of unfavorable financial & economic conditions in India. On the positive front, company is planning to increase its coverage of SME ratings and also setting its footprint in markets like Nepal & Sri Lanka. Consolidated revenues for Q312 increased by 15% Y-Y to Rs 542Mn as compared to Rs 472Mn for Q311, albeit on a Q-Q basis the growth was muted to 4.5% v/s the reported Sep'11 numbers. Rating services recorded sales of Rs 369Mn for Dec'11 v/s Rs 300Mn for Dec'10. ICRA's other businesses (consulting, outsourced and I.T. services) in total have clocked a flattish Y-Y and Q-Q growth."

"Operating margins for the rating services improved by 305bps in the current quarter to 52% (49% Dec'10). On a consolidated level, OPM for Q312 was at 39% as compared to 35% for Q311 supported mainly by lower other expenses as a % of sales (9% v/s 15%). Consolidated bottom-line for the quarter ended Dec'11 reported an impressive 54% Y-Y growth to Rs 174Mn as against Rs 113Mn for the quarter ended Dec'10. {ICRA has been amortising ESOP expenses from Q311 onwards. For the current quarter, amortised amount was Rs 24.4Mn and we believe the remaining compensation would be amortised over the next 2 quarters}. Adjusting for the same, consolidated net profit for Q312 posted a 26% Y-Y growth to Rs 178Mn as against Rs 141Mn for Q311."

"Despite the current headwinds, we are positive on the long-term opportunities for the company as well as the credit rating industry. We believe ICRA is well poised to overcome the shorfalls on account of its experience, brand recognition, good service and industry network. At CMP of Rs 945.8/- the scrip is trading at 22.8x TTM earnings of Rs 41.6/- per share. We recommend an ACCUMULATE in the price range of Rs 870-900/- per share," says Parag Parikh Financial Advisory Services research report.    

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To read the full report click on the attachment