Add CARE Ratings Ltd For Target Rs.646 - Yes Securities
Result Highlights
* Revenue – Revenue came in at Rs 796mn which was a strong growth of 21% on YoY basis and 43% QoQ basis. The growth was driven by strong performance in both rating (19% yoy, 47% qoq) as well as non‐rating segment (98% yoy, 82% qoq).
* Operating Cost – Employee cost saw a jump of 26% partially contributed by ESOP charge amounting to Rs. 22.6mn v/s NIL in corresponding period. Although, other expenses saw a decrease of 39% on YoY basis, it almost doubled on QoQ basis.
* EBITDA – Operating profit came in at Rs. 306mn, which double on YoY basis and grew by 67% on QoQ basis. EBITDA margin stands at 38.4% which was an expansion of 1541bps yoy and 556bps on QoQ basis.
* PAT– PAT stood at Rs. 265mn, a growth of 69% y/y and 40% qoq.
* Proposed Dividend: The board proposed a final dividend of Rs 6 per share.
* New appointments: Ms. Nehal Shah as the Company Secretary & Compliance Officer with effect from June 12, 2021, Mr. Jinesh Shah as the Chief Financial Officer of the Company with effect from June 12, 2021
* New auditors: Considered the appointment of M/.s B S R & Co. LLP, Chartered Accountants as the Statutory Auditors of the Company for a period of five years
Our view:
We have revised our estimates higher by 2% for each of the following years, based on a slightly higher growth assumption for non‐ratings business. With credit growth outlook muted for the near term, we maintain our ADD rating on the stock with a revised 1‐year target of Rs646. The stock currently trades at FY23E P/E of 19.8x. Our current assumption is of market share loss for the next couple of years, if the same can turn around, the scope for re‐rating is significant.
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