ICICI Direct's research report on Credit Analysis & Research
CARE, the second largest rating company by market share, is a pure play on the rating business with 99% (Rs 265 crore) of its FY16 core revenue generated from the rating segment. The highlight of CARE’s business is its best-in-class EBITDA margin of 60%+ and PAT margin of 50%. The business model is asset light with not much capex (Rs 10-15 crore) while it generates strong operating cash flow.
OutlookFalling interest rate outlook, peaking of NPA cycle, rising bond issuances, etc, all augur well for rating agencies. We expect PAT CAGR of 28% in FY16-18E. We remain structurally positive on rating business over next 3 to 5 years. We maintain target price of Rs 1650 valuing at 26x FY18E EPS. We maintain BUY.
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