According to SP Tulsian of sptulsian.com, one can expect a price of Rs 900 in next six months on CARE. It is the second largest rating company.
SP Tulsian of sptulsian.com told CNBC-TV18, "Credit Analysis and Research (CARE) is the second largest rating company. The best part what I like about the company is that out of total income of Rs 227 for FY13, 85 percent of that comes from their core rating business while same is not the case with Credit Rating Information Service of India (CRISIL) and ICRA - the other two companies, the comparable peers who are number one and number three. That is in fact the best part about the company and that is the reason that profit after tax (PAT) margin is very high for the company at 52 percent with PAT close to about Rs 115 crore."
He further added, "This performance, one can say, has been flat over FY12 to FY13, but looking to the sluggishness in the economy, obviously the rating business is also linked with the boom or the performance of the economy. When you have dull and lull in the economy, this kind of performance can be considered quite satisfactory."
"Going by the assignments which have been handled by the company in FY13 of about 7700 assignments, 40 percent of that are new that is 2900 assignments are from the new clients. That also indicates that it is not the same set of client which the company is serving," Tulsian added.
He further said, "If you see the past record, the company went public in December 2012 at an IPO price of about Rs 750 and the stock moved closer to Rs 1000- Rs 960-980 during that time and corrected and ruling close to about Rs 720. Going by the earning per share (EPS) of Rs 40 for FY13, one can conservatively estimate that FY14 should be having an EPS of close to about Rs 44-45. That translates the share ruling at a PE multiple of close to Rs 16-17 while CRISIL is ruling at a PE multiple of Rs 30 plus, ICRA is ruling at a PE multiple of Rs 22-23. So you have a good comfort on valuation and performance parameter. I don’t think that much downside is seen from here on, but one can expect a price of Rs 900 in next six months or so."The Great Diwali Discount!
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