YES Securities' research report on ICRA Limited
ICRA’s Consolidated Rev. in Q2 FY24 was 5% below expectation and PBT was 13% below our estimate. The material miss on revenue came largely from Ratings segment, with Analytics segment revenue growth being moderate as expected. Consolidated EBITDA margin stood at 32.5% v/s estimate of 35.7%, leading to 14% EBITDA miss. The H1 FY24 margin at 33.1% stands 200 bps lower yoy. Slower growth in Ratings & Non-Ratings businesses, further increase in staff cost and structural investments in technology impacted margins. Ratings PBIT margin was 23% v/s 27% in Q1 FY24 and 25% in Q2 FY23, and it included 2% positive impact due to agreement on sharing of common expenses with ICRA Analytics. Ratings margin stands significantly lower than the long-term average. Higher tax rate in the quarter further dented earnings performance.
Outlook
ICRA’s overall growth and margin performance in H2 FY24 would be a key valuation catalyst for the stock. The company trades at 29x 1-year rolling fwd. P/E versus long-term average of 33x. Retain BUY with a lowered 12m PT of Rs6300 (earlier Rs6700).
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