Hold Crisil; target of Rs 2162: Edelweiss

Edelweiss' research report on Crisil

Ratings revenue grew a modest 4.3% YoY due to a sustained weak investment climate and soft credit growth. Bank loan ratings and SME segments continued to remain muted due to sluggish credit off take, though the corporate bond segment has picked up March onwards. Management highlighted that this trend is likely to continue in all segments, particularly due to cut in government subsidy to SME ratings.

Outlook

Industry’s healthy prospects and RBI push to deepen the bond market brighten CRISIL’s long-term growth prospects. However, we maintain ‘HOLD’ due to cut in subsidy in SME ratings and sluggish credit growth, along with rich valuations. Our target price stands at INR 2,162 using DCF, taking 15% growth for first 5 years, declining growth over the next 5 years to a terminal rate of 7% and discount rate of 10%.