Credit Analysis and Research Ltd.

May 16, 2015 . Equities Desk

Credit Analysis and Research Ltd. (CARE) was founded in 1993 and is the second largest rating agency (in terms of rating income) in the country. The company offers a wide range of rating and grading services across a diverse range of instruments and industries. Apart from providing rating services to financial sector, infrastructure sector, corporates, public finance and MSMEs, CARE is also engaged in rating IPOs, educational institutions, shipyards, etc. The company has recently initiated its valuation services and started offering valuation of equity, debt instruments and market linked debentures. Being headquartered in Mumbai (Maharashtra), CARE has geographical presence in Republic of Maldives, Brazil, Malaysia, Portugal and South Africa.

Valuation and view

CARE, with over 20 years of experience in rating debt instruments, enjoys a strong market position with respect to ratings of most types of debt instruments, bank loans and facilities. With expectations of ~13.3% and ~12.6% growth in revenue and profitability, respectively, in FY16E, we believe the company is likely to witness healthy growth across its segments. While, expectation for further revival in the economy, in the near-term, raises prospects of the highermargin BLR segment. Further, the company’s focus on SME segment, where it sees a lot of opportunities in the long-term, also makes CARE’s prospects brighter.

Considering the above aspects, we remain bullish on the stock. We rate the stock as ‘BUY’ at a current CMP of `1,500.0, attractively placed at P/E of ~28x and ~26.0x, for FY16E and FY17E, respectively to arrive at a target price of `1,803.0, with a potential upside of ~20% for the coming 12 months.

Research Report Credit Analysis and Research Ltd

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