Hold ICRA: Parag Parikh Financial Advisory Services
Parag Parikh Financial Advisory Services (PPFAS) has recommended hold rating on ICRA , in its November 4, 2011 research report.
- Ratings revenue up 48% Q-Q , with margins jumping to 47.9%
- Other business also reporting a good 11% Q-Q & Y-Y revenue growth
- Overall operating margins at 37.3%, inching upwards to older levels of 41-42%
- P/E at a peak of 27.7x TTM earnings of Rs 35.4/- per share
“ICRA has reported a good set of numbers for the quarter ended September 2011 on account of more than impressive rating business's 48% Q-Q growth (though the debt market issuances remain sluggish). On a Q-Q basis, consolidated revenues for Sep'11 increased handsomely by 34% to Rs 519Mn as compared to June 2011 numbers, albeit on a Y-Y review the growth was muted to 7% from Rs 484Mn in Sep'10. On a Y-Y basis, rating services recorded a flat 5% growth to Rs 353Mn for Sep'11 v/s Rs 335Mn for Sep'10 on account of market share loss due to increasing competition from peers. ICRA's other business segments (consulting, outsourced and I.T. services) in total have a shown decent growth. Ratings segment in the consolidated revenue mix was at 68%, consulting services contributed 11% and the rest, a mix of Outsourced and I.T. services fees.”
"Consolidated reported bottom line for the quarter ended Sep'11 has taken a hit by 39.7% Y-Y to Rs 87Mn as against Rs 144Mn for the quarter ended Sep'10. ICRA has been amortising ESOP expenses from Q311 onwards & this noncash expense is to be amortised on a straight-line basis over the vesting period, by crediting to “Reserves & Surplus”. For Sep'11, amortised amount was Rs 45.6Mn and we believe the remaining compensation would be amortised over the next 3 quarters. Also for the current quarter, company has made a provision for diminution in carrying value of investments, debited from the P&L account to the tune of Rs 8.4Mn. Adjusting for the above mentioned extraordinary items of Rs 54Mn, the consolidated net profit on a Y-Y basis is flat at Rs 141Mn, (65% Q-Q growth v/s June 2011 adjusted bottom-line).”
“At CMP of Rs 980.4/- ICRA is trading at 27.7x TTM earnings of Rs 35.4 per share. Going ahead, we foresee a moderate growth after taking into effect the on going ESOP expense (balance amount to be amortised: Rs 134.3Mn), subdued bond market issuances & lower bank loan ratings. The rating business is also facing volatile times due to rising peer competition on the pricing front and would take a few more quarters in sustaining its top-line as well as margins. We maintain a HOLD on the scrip,” says Parag Parikh Financial Advisory Services research report.
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Parag Parikh Financial Advisory Services (PPFAS) has recommended hold rating on ICRA , in its November 4, 2011 research report.
- Ratings revenue up 48% Q-Q , with margins jumping to 47.9%
- Other business also reporting a good 11% Q-Q & Y-Y revenue growth
- Overall operating margins at 37.3%, inching upwards to older levels of 41-42%
- P/E at a peak of 27.7x TTM earnings of Rs 35.4/- per share
“ICRA has reported a good set of numbers for the quarter ended September 2011 on account of more than impressive rating business's 48% Q-Q growth (though the debt market issuances remain sluggish). On a Q-Q basis, consolidated revenues for Sep'11 increased handsomely by 34% to Rs 519Mn as compared to June 2011 numbers, albeit on a Y-Y review the growth was muted to 7% from Rs 484Mn in Sep'10. On a Y-Y basis, rating services recorded a flat 5% growth to Rs 353Mn for Sep'11 v/s Rs 335Mn for Sep'10 on account of market share loss due to increasing competition from peers. ICRA's other business segments (consulting, outsourced and I.T. services) in total have a shown decent growth. Ratings segment in the consolidated revenue mix was at 68%, consulting services contributed 11% and the rest, a mix of Outsourced and I.T. services fees.”
"Consolidated reported bottom line for the quarter ended Sep'11 has taken a hit by 39.7% Y-Y to Rs 87Mn as against Rs 144Mn for the quarter ended Sep'10. ICRA has been amortising ESOP expenses from Q311 onwards & this noncash expense is to be amortised on a straight-line basis over the vesting period, by crediting to “Reserves & Surplus”. For Sep'11, amortised amount was Rs 45.6Mn and we believe the remaining compensation would be amortised over the next 3 quarters. Also for the current quarter, company has made a provision for diminution in carrying value of investments, debited from the P&L account to the tune of Rs 8.4Mn. Adjusting for the above mentioned extraordinary items of Rs 54Mn, the consolidated net profit on a Y-Y basis is flat at Rs 141Mn, (65% Q-Q growth v/s June 2011 adjusted bottom-line).”
“At CMP of Rs 980.4/- ICRA is trading at 27.7x TTM earnings of Rs 35.4 per share. Going ahead, we foresee a moderate growth after taking into effect the on going ESOP expense (balance amount to be amortised: Rs 134.3Mn), subdued bond market issuances & lower bank loan ratings. The rating business is also facing volatile times due to rising peer competition on the pricing front and would take a few more quarters in sustaining its top-line as well as margins. We maintain a HOLD on the scrip,” says Parag Parikh Financial Advisory Services research report.
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