Domestic brokerage house Yes Securities is bullish on this analytics firm CRISIL, a part of ace investor Rakesh Jhunjhunwala's portfolio. It has a 'Buy' rating on the stock with a target price of ₹4,100 per share, indicating an upside of around 23 percent.
In the last 1 year, the stock has surged over 77 percent as against an 18 percent rise in benchmark Nifty. However, in the last 10 years, the stock has surged 230 percent.
According to the shareholding pattern for March 2022, Rakesh Jhunjhunwala holds a 2.89 percent stake or 21 lakh shares in the company. His wife Rekha Jhunjhunwala also holds 2.57 percent stake or 18.68 shares in the firm separately.
With a market cap of more than ₹24,000 crore, CRISIL is an analytical company, together with its subsidiaries, that provides ratings, data, research, and solutions. It operates through three segments: Ratings, Research, and Advisory. The company was formerly known as The Credit Rating Information Services of India Limited and changed its name to CRISIL Limited in December 2003. CRISIL Limited was incorporated in 1987 and is headquartered in Mumbai, India.
According to Yes Securities, the strong growth performance in CRISIL was driven by improved growth momentum in the domestic rating business, and sustained traction in the Global Research and Risk Solutions (GR and RS) business underpinned by strong demand for core offerings in research.
The brokerage also raised the earnings estimates by 4-5 percent across 2022-24 by lifting growth and margin assumptions on the back of strong performance delivery in Q12022 and positive management commentary about concurrent trends in market or wallet share in various businesses and readiness or capabilities to tap evolving opportunities.
"We estimate 15 percent or 23 percent consolidated revenue or PBT CAGR over CY21-24 and ~400 bps margin expansion through the period. Improved margin and growth will cause RoE to expand by six ppt to 38 percent in CY24," it said.
It further noted that the stock trades at 41x 1-yr rolling fwd. P/E, and its peak valuation has been around 55x in the past seven years. Multiple is expected to re-rate on prospects of substantial RoE expansion.
CRISIL reported a net profit of ₹121.62 crore for the quarter ended March 2022, up 46 percent as against ₹83.52 crore during the previous quarter ended March 2021. Its net sales also rose 20 percent to ₹594.94 crore in Q4FY22 as against ₹495.20 crore in the year-ago period.
54.44 percent of analysts polled by MintGenie consider the stock to be of 'high risk'.
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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of MintGenie.