Buy CRISIL; target of Rs 2270: Karvy Stock Broking

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26 Aug, 2025 12:21

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Karvy Stock Broking ‘s research report on CRISILThe rating revenues witnessed 8% growth in 2014 compared to last year. Research and advisory revenues were up 16% and 14% respectively. Research segment profitability grew by 6% on account of improved performance by GR&A (Global Research & Analytics). Ratings profitability was marginally up by 1% due to sluggish business environment. The advisory segment witnessed a fall in profitability of around 12% on account of challenging business environment. Going forward, the consolidated revenues are likely to grow on the back of debt issuances by corporations and financial institutions which in turn can improve the businesses for CRISIL. Consistent improvement in revenues: The top line is expected to grow at 7% for CY15E, 8.4% for CY16E and 8.8% for CY17E on strong improvement across all the business segments of Crisil where as the bottom line is expected to grow by 18% and 19% in CY16E and CY17E respectively.SME ratings & Debt issuances to improve going forward: The interest rate cycle is witnessing a downtrend as economic activity continues to be sluggish. With fall in the interest rates, we expect the debt restructuring activity, new debt issuances and improvement in SME & MSME ratings to pick up which can spur demand for the rating firms.Zero Debt Company: CRISIL is a zero debt company since its inception. The company has been incurring capex through internal accruals. We expect the company to continue with the same strategy of being an un-levered firm with consistency in capex across the various business segments.Outlook and Valuation At CMP of Rs.1945, CRISIL is currently trading at 36.8x CY17E EPS. We value the company at P/E 43.0x for CY17E EPS for a target price of Rs.2270, based on the expected improvement across research, ratings and advisory services. We, therefore, initiate coverage on CRISIL with a “BUY” rating for a target price of Rs.2270 representing an upside potential of 17% in a 12-15 month period.

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