Buy CRISIL; target of Rs 1050: Emkay

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Buy CRISIL; target of Rs 1050: Emkay

Emkay Global Financial Services is bullish on CRISIL and has recommended buy rating on the stock with a target of Rs 1050 in its February 17, 2012 research report.

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RELATED NEWS Buy CESC; target of Rs 454: Motilal Oswal Buy Adhunik Metaliks; target of Rs 93: Motilal Oswal Buy SAIL; target of Rs 132: KRChoksey ALSO READ See previous views by Emkay Global Financial Services See what other Experts & Brokerages are saying about CRISIL See messages about CRISIL CRISIL BSE | NSE 01/06/12 Are Mutual Funds betting on CRISIL?

Emkay Global Financial Services is bullish on CRISIL and has recommended buy rating on the stock with a target of Rs 1050 in its February 17, 2012 research report.

"CRISIL Q4CY11 revenue at Rs2.2bn (up 26.1% yoy and 4.7% qoq) was inline with our expectation. This growth in revenue was led by 34% yoy (4.9% qoq) growth in research and information services segment and 14.1%yoy growth in rating revenues. Advisory services at Rs162mn were up 7% yoy ."

"Rating revenues grew at a moderate pace in CY11 led by lower debt activity on account of highly volatile interest rate environment. However with interest rate cycle peaking out, debt issuances are likely to increase in CY12, hence aiding growth in rating revenues. Debt issuance has already improved in September and December quarter with 28- 30%yoy growth in volumes. Moreover with continued traction in IREVNA and Pipal research, growth in research is also likely to remain strong in CY12 as well. Despite 26.1%yoy growth in revenues, CRISIL operating profit grew by just 3.9%yoy (slightly below expectation) to Rs729mn, as expenditure rose by 35%yoy to Rs1.4bn. Resultantly, EBIDTA margins contracted by 606bps yoy to 33.5%. The higher expenditure was primarily led by 40.5%yoy increase in employee cost as in the same quarter last year, employee cost for Pipal research was included only for 29 days."

"The company reported a 10.4%yoy growth in reported net profit to Rs558mn, inline with expectation. However this includes one time profit of Rs71.3mn on account of forex gains and Rs15.8mn on account of sale of office space. Adjusted for the above one off items the net profit declined by 2.8%yoy to Rs498mn, slightly below expectation. CRISIL completed its buyback of 0.9mn shares at an average price of 871 in December 2011, totaling to Rs795mn. Resultantly the equity capital came down from Rs70.9mn to 70.1mn. CRISIL completed its previous buy back between Nov 3-10, 2010 of 128,156 (1,281,560 post split) shares at an average price of Rs6,200 (Rs620 post split), totalling to Rs795mn. The frequent buyback's resembles strong operating cash flow position of the company. The average operating cash flow over the last four years stood at a strong Rs2.8bn."

"While at 27x CY12E EPS the valuations look quite expensive, we believe that the strong cash flow generation capabilities of the company should continue to support the expensive valuations. We maintain our BUY rating on the stock with price target of Rs 1050," says Emkay Global Financial Services research report. 

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