CARE | Sharp increase in other income boosts the net profit of Q2FY15 | CMP: Rs 1313/- | Rating: BUY | Target: Rs 1551 (P/E multiple of 25x for FY16E) :: IndiaNivesh

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CARE’s income from operations increased 14% y-o-y to Rs 743 mn (our estimate:
Rs 698 mn) in Q2FY15. This higher income came from both new ratings assignments
as well as surveillance cases. As we mentioned in the result preview, there might be
increase in contribution from SME rating business. Total operating expenditure
increased 28% y-o-y to Rs 227 mn mainly due to 43% y-o-y increase in the staff cost
to Rs 167 mn. It might be the result of increase in staff count in the company.
EBITDA increased 8% y-o-y to Rs 515 mn (our estimate: Rs 495 mn). EBITDA margin
reduced to 69.4% from 72.9% in Q2FY15. However, it was much ahead than EBITDA
margins of its listed peers ICRA (40.1% in Q2FY15) and CRISIL (33.3% in Q2FY15).
Other income surprised positively as it grew 316% y-o-y to Rs 227 mn. (We have to
wait for the management commentary to know sources of increase in other income.)
As a result, the company’s net profit increased 50% y-o-y to Rs 524 mn (our estimate:
Rs 524 mn). Net Profit margin increased to 54.1% from 49.6% in Q2FY15.
The company had announced a special dividend of 650% in Q2FY15 with the purpose
of sharing the cash surpluses with the shareholders. Combining this with the interim
dividend announced in Q1 of 60%, the total dividend paid so far is 710% (Rs 71).

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