CRISIL for 1QCY2011

For 1QCY2011, CRISIL registered strong performance with 24.7% yoy growth in net sales to Rs179cr. OPM expanded by 41bp yoy to 32.6%. Net profit came in flat at Rs46cr. We continue to maintain our Buy rating on the stock

Top line posts strong growth, margins flat yoy: For 1QCY2011, CRISIL’s top line grew by 24.7% yoy to Rs179cr (Rs143cr), led by strong growth in its research segment, which witnessed 45.2% yoy growth on the back of Pipal Research’s revenue for the full quarter and strong growth in Irevna and CRISIL Research. However, the rating business was dull during the quarter, largely due to a slowdown in the bond market caused by higher interest rates during the year.
The rating segment managed 11.1% yoy growth. The advisory segment witnessed an 18.7% yoy decline in revenue during the quarter. Despite a dull quarter for the rating segment, the company managed to maintain its margins at 32.6%,
a minute increase of 41bp yoy. Net profit came in flat at Rs46cr. However, adjusted for other income, net profit increased by 70.9%, as the company had sold property worth Rs18cr in 1QCY2010.

Outlook and valuation: We expect CRISIL to post a 21% CAGR in revenue over CY2010–12 and continue to maintain its leadership position. The company benefits from its asset-light business model, which is high on intellectual assets (employee cost-to-sales is around 40%). Further, the company is debt free and has 40% plus RoE. Additionally, CRISIL enjoys strong parentage (Standard and Poor's). Currently, the stock is available at 19.0x CY2012E earnings, which is at the lower end of its historical range of 16.4–29.9x one-year forward EPS. 

We continue to maintain our Buy rating on the stock with a target price of Rs7,616, valuing it at its five-year median of 22x CY2012E earnings.

If you have any further queries, feel free to call us on 022 39357600, Extn: 6864 / 6865  or mail us at advisory@angelbroking.com