CRISIL - 1QCY2012 Result Update - Angel Broking

For 1QCY2012, CRISIL's net sales grew by 28.5% yoy to Rs.230cr. The company reported a 317bp yoy expansion in OPM to 35.8%. Net profit increased by 23.9% yoy to Rs.57cr. We continue to remain Neutral on the stock.

Top line posts strong growth, EBITDA margin expands: For 1QCY2012, CRISIL's top line reported 28.5% yoy growth to Rs.230cr, led by strong growth in its rating segment, which witnessed 40.1% growth backed by strong growth in the bank loan rating segment. The company rated nearly 1,100 entities during 1QCY2012 vs. 2,700 entities in CY2011. The research segment continued its strong growth during the quarter, registering 22.9% yoy growth. The advisory segment also witnessed an increase in its revenue, registering 18.9% yoy growth. The company's EBITDA margin expanded by 317bp yoy, largely due to lower staff cost, which declined to 40.6% of sales in 1QCY2012 from 43.7% of sales in 1QCY2011. Net profit came in at Rs.57cr, up 23.9% yoy; while margin contracted by 92bp yoy to 24.8%, largely due to increased tax rate. CRISIL's tax rate increased to 28.1% of PBT in 1QCY2012 vs. only 15.1% of PBT in 1QCY2011.

Outlook and valuation: We expect CRISIL to post a 17.2% CAGR in revenue and 16.5% CAGR in PAT over CY2011-13 and continue to maintain its leadership position. Despite the recent buy back, the stock is available at rich valuation of 26.7x CY2013E earnings, which is at the higher end of its historical range of 16.4x-29.9x and five-year median of 22x one-year forward EPS. We continue to maintain our Neutral recommendation on the stock.

Source : Equity Bulls

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