ICRA - Traction in ratings drives performance - Emkay

ICRA's Q4FY12 revenue inline with expectations at Rs626mn. However net profit at Rs251mn (48%qoq) came in higher than expectation primarily led by higher other income.

- Traction continues in rating business with rev at Rs433mn up 17.4% qoq. Consulting business also reported handsome growth of 16.6%qoq, contributing 11.8% to the total rev.

- EBIDTA margins further improved to normalized level of 40.8%. Rating margins expanded 367bps to 55.3%, while consulting margins was also higher at 24.6%.

- Consecutive quarters of growth in rating business comes in as +ve. Maintain ACCUMULATE with revised price target of Rs1,250.

Valuation and view

While the continued traction in rating business was encouraging, we also liked the companies renewed focus on non rating business which has stagnated for long. We believe the acquisition of BPA technologies will not only drive the growth in non rating business, but will also mitigate the business concentration risk to some extent. We have thereby raised our FY13E EPS estimates by 8.3%. At CMP the stock trades at 16.3x/ 13.8x FY13E/14E EPS of Rs70.1and Rs82.8. We rate the stock as ACCUMULATE with TP of Rs1,250 valuing it at 15x CY13E/14E avg core EPS of Rs66 plus avg cash per share of Rs263.

Source : Equity Bulls

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