CARE Ratings Ltd. share price target

The sector—comprising bond issuance, bank credit, securitisation, and non-rating services—is projected to grow at a CAGR of 12% till FY28. CARE Ratings is expected to outperform with a revenue CAGR of 14% while maintaining healthy EBITDA margins of 38%.

Care being the second largest full service rating Company in India, the Company's list of clients includes banks and other financial institutions, private sector companies, central public sector undertakings, sub-sovereign entities, small and medium enterprises (SMEs) and microfinance institutions, among others. Slowdown in economic growth impacted the company too. The first half of FY20, even Q3 FY20 remained disappointed because of the headwinds faced by the NBFC sector which had impacted the borrowings. And the capex related borrowings not getting the...

Care being the second largest full service rating Company in India, the Company's list of clients includes banks and other financial institutions, private sector companies, central public sector undertakings, sub-sovereign entities, small and medium enterprises (SMEs) and microfinance institutions, among others. Slowdown in economic growth impacted the company too. The...

Q4FY19 revenues were down ~10% YoY to Rs 89.4cr (up 23% QoQ). Growth in volume of debt rated instruments at 39% was mainly led by bank loan ratings and long term funding. Operating margins have come down to 55%.

We retain BUY on CARE with revised TP at Rs1,550 (vs. Rs1,600 earlier). Q2'19 revenue / PAT were below estimates. This is even as volume of debt rated grew 32.6% YoY and points to pricing pressure. The growth in high-yielding non-BLR segment remains muted (down 3% YoY for H1'19); we foresee trends to continue in H2'19 and have thus trimmed our overall volume growth assumptions for FY19E. In the backdrop of concerns around rating downgrade / delay in rating changes, CARE has strengthened its rating standards further. We will watch for outcome therein. We like CARE for its business model, return ratios and free cash...

ICICI Securities Ltd | Retail Equity Research CARE Ratings has been the second largest rating company by market share of ~29%. Around 99% (| 322 crore) of its FY18 revenue is generated from the rating segment. However, the recent quarterly...

Reported rating revenues of the company witnessed a decline of 6.3% YoY to | 57.4 crore vs. >| 60 crore estimate. This was due to 2.1% YoY decline (after several quarters) in total volume of debt rated to | 382000 crore. Further, corporate/long term bond ratings (which are high yielding in nature) fell 43.5% YoY In Q1FY19, MTM gains on FMPs were lower vs. Q1FY18. This resulted in lower accrual of other income at | 4.2 crore vs. | 6.5 crore last year. Staff cost was higher due to Esop charge of | 3.66 crore...

ICICI Securities Ltd | Retail Equity Research Reported rating revenues increased above estimate by 21.4% YoY to ~| 94 crore. The growth has been the highest in last several quarters and is led by increased ratings in the short-term debt category The overall quantum of debt rated increased 25% YoY to | 16.48 during FY18. This was due to 7.6% increase in bank loan ratings, 9.4% in long term debt rated and 175.6% in short-term debt rated. The rise in short-term debt rated is mainly due to higher volumes of...

Revenue grew 13% YoY in Q3 with 19% growth in volume of debt rated. Adjusting for the accounting policy change (refer below), revenue growth was ~20% YoY. Employee costs increased ~40% YoY due to higher ESOP charges and higher employee count resulting in margin compression of ~500 bps YoY to 62%.

CARE's revenues were slightly above estimates but the bottomline was below estimate owing to lower other income & higher staff cost Reported rating revenues increased at a healthy rate of 14.2% YoY to | 74.8 crore. The QoQ decline of 18% in rating revenue was owing to surveillance fee income from Q2. There was an 18.2% YoY increase in volume of fresh debt rated in Q3FY18 to | 3.25 lakh crore. In that, volume of bank loan ratings increased 12.1% YoY However, PAT came in at | 37.3 crore (down 2% YoY) vs. estimate of...

PAT came in largely in line at | 48.3 crore (up 11.8% YoY). PAT margins were at 53.1% in Q2FY18 The company declared an interim dividend of | 6 per share. For,...

We retain Hold on Credit Analysis And Research (CARE) with TP at Rs1,560 (vs. earlier TP at Rs1,600). Q2'18 reported revenue was a tad higher to our estimates and follows the change in accounting policy towards surveillance related income recognition. Margins, though saw some moderation and we expect trend therein to continue. H2'18 promises to be better than H1'18 and is given the favourable regulatory framework its likely impact on the rating revenues for the credit rating agencies (CRA's). CARE with its strong business model and respectable market share remains one of the key beneficiaries. While we remain positive on CARE,...

ICICI Securities Ltd | Retail Equity Research Reported rating revenues were at | 76.4 crore (up 2% YoY). This was on account of slower growth in volume of rated debt, which increased 7.7% YoY and lower surveillance fee in Q4 Other income traction stayed strong and was in line at | 8.4 crore, up 2.4x YoY. This higher increase was due to redemption of liquid investment schemes and maturity of FMPs EBITDA came in at | 47 crore while the EBIDTA margin was at 61.7%...

CARE Q3FY17 standalone earnings performance surprised positively on account of higher other income on FMP profit booking (Rs 16cr) and strong EBITDA margins. Revenues clocked in Rs 66cr (up 4.8% YoY), while reported PAT stood at Rs 45cr (up 68% YoY). The rating industry's healthy long-term prospects, strong visibility due to RBI measures to deepen the bond market and CARE's sustained earnings performance keep us positive on the stock.

ICICI Securities Ltd | Retail Equity Research Reported rating revenues were at | 65.9 crore (up 5.1% YoY). For 9MFY17, rating revenues were up 7.8% YoY. This was on account of an increase in both volume of fresh debt rated and surveillance exercises carried out during the period Other income in Q3FY17 surprised positively and was at | 16.3 crore (I-direct estimate: | 4.5 crore) vs. <| 3 crore seen in the last several quarters. This was due to profit booked on maturity of certain...

Credit Analysis and Research Ltd (CARE) is in the business of analysing and giving financial ratings to companies based on their financial health. Apart from this, it rates debt and bond instruments floated by various institutions. It is the second largest rating agency in India in terms of rating revenue.

ICICI Securities Ltd | Retail Equity Research Rating revenues were at | 81 crore (up 4% YoY) in Q2FY17. For H1FY17, rating revenues were up 9.2% YoY. This was on account of...

We recently conducted a call with the management of Credit Research & Analysis Ltd. (CARE Ratings), the second largest rating agency in India. Since the past two years, the topline growth of the company has been muted, i.e., in the range of 7-10%. This was largely due to a slowing economy, which halted the capex cycle, adversely impacting credit issuances. However, with the government's renewed thrust on the infrastructure sector, coupled with a...

Credit Analysis & Research ltd. (CARE) was incorporated in 1993 and is a full service rating company that offers a wide range of rating and grading services across sectors. The company has been promoted by major banks and financial institutions with IDBI Bank holding 16.6% followed by Canara Bank (12%) and SBI...