Buy CARE; target of Rs 1722: Axis Direct

Axis Direct's research report on CARE

CARE’s net profit for the quarter grew by 8% YoY (down 45% QoQ) to Rs 38 cr on account of strong growth of 241 % YoY in Other income (primarily investment income) due to profits booked on maturity of certain investments made for a longer tenure. Rating income grew by 1.5% YoY in Q4 FY17 (6% in FY17) on account of an increase in both the volume of fresh debt rated (7.5% YoY) and surveillance exercises.

Outlook

Considering the economic recovery and improvement in credit growth, we are positive on the rating business of CARE. We value CARE at a PE of 25x FY19E EPS of Rs 69 to arrive at a valuation of Rs 1722 per share. We reiterate our BUY rating on the stock.