Centrum is bullish on CARE Ratings has recommended buy rating on the stock with a target price of Rs 1550 in its research report dated November 05, 2018.
Centrum's research report on CARE Ratings
We retain BUY on CARE with revised TP at Rs1,550 (vs. Rs1,600 earlier). Q2’19 revenue / PAT were below estimates. This is even as volume of debt rated grew 32.6% YoY and points to pricing pressure. The growth in high-yielding non-BLR segment remains muted (down 3% YoY for H1’19); we foresee trends to continue in H2’19 and have thus trimmed our overall volume growth assumptions for FY19E. In the backdrop of concerns around rating downgrade / delay in rating changes, CARE has strengthened its rating standards further. We will watch for outcome therein. We like CARE for its business model, return ratios and free cash flow yield. Valuations at 17.2x FY20E EPS remain attractive. Retain BUY.
Valuations at 17.2x FY20E EPS for an exit RoE / RoCE at ~27% remain attractive. Retain BUY with revised TP at Rs1,550 (valued at 25x FY20E EPS). Modest growth in BLR volume or margin pressure remains key risks. Reputational risk is the biggest risk could impact valuation multiples meaningfully.
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