Accumulate CRISIL; target of Rs 1050: Emkay

Emkay Global Financial Services is bullish on CRISIL and has recommended accumulate rating on the stock with a target of Rs 1050 in its 11 December 2012 research report.

“CRISIL trades at a higher EV/ EBIDTA of 26x CY11 which is justified, given its presence in more value added analytics, 25% higher rev/ employee, higher margins and RoCE. CRISIL runs much profitable model with EBIDTA per employee in research business higher at USD16500 vs. USD7000 for EVS.”

“Some media reports suggest that promoters of EVS, KPO firm are looking to sell its majority stake in the company at valuation of 12-15x CY11 EBIDTA or $250mn. Alongside high end analytics products like buy side/sell side research like IREVNA (CRISIL’s analytics business), EVS also offers data and process analytics. Evalueserve was incorporated in the year 2000 by Marc Vollenweider, a former Mckinsey professional and Alok Aggarwal, a former IBM employee as a knowledge process outsourcing firm. While the promoters hold 75%, 11% is held by Swiss family office IHAG Holdings, and the rest is owned by employees. The company provides a range of knowledge-based professional research and analytics services for clients worldwide, with offices across India, China, Eastern Europe, and Latin America. The revenue over the last five years has grown at a CAGR of 40% to $105mn in CY11. The employee strength as on CY11 crossed 2600."

“Moody’s Corp. (MCO) acquired Copal Partners (CP) which is also into similar business as IREVNA in Q4CY11. MCO had acquired 75% economic interest in CP for a total consideration of USD193mn including USD60mn for acquiring a call option to buy residual stake from minority shareholders. CP’s revenues for CY11 were estimates at USD50mn by various media reports, thus valuing the company at 5.1x CY11 revenues. Assuming the EBIDTA margins between 20-30%, the deal would value CP at 17-25x EBIDTA. At CMP, CRISIL trades at 26x CY13 EPS with RoE/ RoIC in excess of 50%/ 100% respectively. Maintain accumulate with price target of Rs1,050,” says Emkay Global Financial Services research report. 

Public holding more than 90% in Indian cos

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