CRISIL - Lower bond ratings take toll; Target Price: Rs 7,000:: Emkay

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CRISIL

Lower bond ratings take toll

HOLD

CMP: Rs 6,834                                       Target Price: Rs 7,000

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n     CRISIL’s Q1CY11 operating revenue were flat qoq at Rs1.8bn driven by 3% qoq decline in rating revenues and 30% qoq drop in advisory revenues

n     The operating margins declined by 280bps yoy (755bps qoq) to 32% driven by sharp increase of 29% in expenditure and lower contribution from high margin bond rating business

n     Rating revenues likely to remain lackluster till there is a pick up in the corporate bond market. However, costs  likely to remain elevated

n     Valuations have seen sharp run up. The stock is currently quoting at 24.7x/19.7x CY11E/CY12E EPS. Downgrade to HOLD with TP of Rs7000