Here are the Research Analyst
Review and Recommendations of CARE IPO to Subscribe or not to,
GEPL Capital has the following recommendation
At the upper end of the price band of Rs750, CARE is trading at 21.51x its H1FY13 annualized earnings. Even at the upper end of the price band, the valuation is cheaper than its two listed peers. Considering the financial performance track record of CARE and of the ratings industry in general, we believe that there is huge scope for the company to expand operations and diversify its offerings. Hence, we feel the company provides a good investment opportunity to investors over the medium to long term.
SBI Caps Securities has the Following Recommendation,
CARE Ltd. is currently valued at 20.1x and 21.5x of its post issue annualized H1FY13 earnings at lower and upper price band respectively whereas it is valued at 4.7x and 5.0x on P/BV multiple. While comparing the company to its closest peers, the company appears to be fairly valued on most of the valuation parameters.
CARE's strong market position in rating debt instruments and bank facilities, brand presence, healthy financial position coupled with prominient client base makes the issue worth investing. However, the risk of slowdown in the credit market remains a major concern. We recommend Investors to Subscribe the issue.
IndiaNivesh has the Following Recommendation
CARE has emerged as one of the fastest growing rating company in the industry with increasing market share in debt and bank loan ratings. We are impressed by its above industry growth rate, highest margins, superior efficiency and return profile. At higher side of the price band, it is trading at P/E of 21.4x for FY13 annualised EPS which lower than peers of CRISIL at 33.4x for CY12 annualised EPS and ICRA at 31.3x for FY13 annualised EPS. Hence we recommend SUBSCRIBE to the issue.
KR Choksey Analyst Manish Ostwal has the following Recommendation
Fastest growing rating agency, huge long term growth opportunity driven by higher private sector infrastructure spending, favorable regulatory developments & development of bond market, superior margins & return ratios and diversifying products & geographies are key value drivers for CARE Ratings in our view. CARE Ratings issue is quoted 21.4x FY13 annualized earnings. Rating business are traded at 35-37x in the market, we believe strong growth, better margins, superior return ratios and likely diversification should command valuation multiple closer to peers valuation. Hence we recommend subscribe to the issue with medium term investment objective. We also expect 15% listing gains on the issue from upper band
Sushil Finance has the following Recommendation for CARE ratings IPO
CARE will be the third rating agency in the country to go public after Crisil and Icra. Both the listed peers have rewarded ipo investors. Care is a debt free company as of now and its financial performance has also been good(as mentioned above) with an average EPS of Rs. 35.54 for last three fiscals & Rs. 17.53 for first half of current fiscal. It has a P/E of 20 plus and a P/BV of around 4.7. Its competitors CRISIL has a P/E multiple of about 37 and ICRA has a P/E multiple of about 26 so CARE has certainly priced its IPO quite reasonably.We feel all this provides a good case for subscribing to the CARE IPO.
MicroSec has the Following Recommendation
CARE is the third rating agency in the country to go public after CRISIL and ICRA. At the upper price band of INR750 and lower price band of INR700, the issue of “Credit Analysis and Research Ltd” is quoted at 21.4x on the upper side of the price band and 20x on the lower price band on its annualized FY13 EPS of INR35. The rating business is trading at 33-35x in the market. We believe that company’s superior growth in profitability, high return ratios, strong business credibility and brand and likely diversification will boost the valuation multiples. We recommend investor Subscribe to the issue
ShareKhan Views on the IPO are as Follows,
CARE’s revenues have grown at a 38.1% CAGR over FY2008- 12 and looking at its half-year performance we believe the momentum in the revenue growth is likely to continue going ahead. In addition to the healthy revenue growth, the company enjoys a superior OPM as compared with its peers. Consequently, the net profit of the company has grown at a 44.3% CAGR over FY2008-12. On the valuation front, the issue is priced at 17.3x (at the lower end of the price band) and 18.5x (at the upper end of the price band) FY2012 earnings. That is a discount to its peers like CRISIL and ICRA which is not warranted, given CARE’s superior margins and extent of growth. Hence, we believe this IPO is a good medium- to long-term bet for investors as it serves as a good investment opportunity.
Nirmal Bang Securities Views on the IPO are as follows,
The shares of CARE are offered at 4.3x P/BV and 17.0x P/E calculated at higher band of price for FY13E. Its competitors CRISIL has a P/E multiple of about 26.3x CY13E and ICRA has a P/E multiple of about 21.1x FY13E so CARE has certainly priced its IPO quite reasonably. Considering the financial performance track record of CARE and the ratings industry in general, we believe that there is huge scope for the company to expand operations and diversify its offerings. Moreover, the superior business model of the company where there is no requirement for working capital and zero debt also provides a significant boost. We believe that CARE’s lower multiple as compared to other rating agencies even though the growth rate is higher which offers an investment opportunity both for listing gain and long term investment. Therefore, we recommend a “SUBSCRIBE”.
SPA Securities Analyst Sumit Duseja's recommendations is as follows,
We are optimistic on the huge long term opportunities for the credit rating sector on the back of development in debt market which is at nascent stage in India. CARE, being one of the largest players in the industry is positioned strongly on back of years of rating experience across various industries along with high brand recognition and strong industry network. On the valuation front, at upper band, stock is available at 21.5x annualized H1FY13 EPS. Historically, industry PE has oscillated between 20x-30x. CARE, however, is more comparable to ICRA in terms of size but outscores in terms of operating margins and CAGR over the last 4 years which has been 38% vis-à-vis 20% for ICRA. Hence, it should command better multiples enjoyed by ICRA. We recommend SUBSCRIBE to the issue for listing gains as well as a good long term investment.
Angel Broking Analysts Sourabh Taparia and Vaibhav Aggarwal has the following Reviews and Recommendation on the IPO
The stock is valued at 17.9x at upper band on TTM earnings (taking 2HFY2012 earnings to be 60% of entire FY2012), which is at a ~18% discount to ICRA and ~45% discount to CRISIL. Even on a TTM EV/EBITDA basis, it is valued at ~39% discount to CRISIL and ~33% to CARE. However, on a TTM EV/Sales basis, it is valued at ~27% premium to CRISIL and ~63% premium to ICRA, which is due to its high margins (likely to have a downward bias from here on). Moreover, the company has reported cash and current investments worth `91/share as of 1HFY2013. Overall, considering the high intellectual capital/knowledge oriented and cash generating nature of the business, combined with reasonable 12-15% revenue growth expectation, we believe the IPO is reasonably priced at the upper band. Hence, we recommend subscribe to the issue
EMKAY Shares has the following Views
At the given price band the stock trades at 16.8x FY13E core EPS vs. 22.1x for ICRA and 33.5x for CRISIL. CARE will also likely end up with cash of Rs138/share and RoE of 29% for FY13E. Even as the risks remain in form of higher default rates and higher dependence on BLR for revenues, discount of 25% over ICRA and 50% over CRISIL PER offers 20% upside to the upper band of offer price, valuing stock at 20x FY13E EPS and adding Rs138/share of cash.
Anand Rathi Analysts Shweta Prabhu and A.K. Prabhakar said
CARE has good financial track record with consistent dividend payment history. At the higher band of the price it will trade at 18x its FY12 earnings which is comparatively cheaper than its peers, though it will face competition from them in terms of size and market exposure going forward. But it does have scope for expansion and tap the untapped markets in future. We feel investors can SUBSCRIBE with a longer term perspective.
Paterson Securities of Switzerland Analyst Sanjeev Rohra said,
At the issue price of Rs 700 - 750, CARE is attractively priced at 17.3 and 18.5 x its FY12 earnings. This is at a significant discount to its listed peers who are currently trading at 25 to 33x historic earnings. With the growth that the company has witnessed over past few years (a compounded growth rate of 41% on the top-line and 44% on the bottom-line over FY08 - 12), high return ratios, positive cash flows, and superior management pedigree, we recommend investors to Subscribe to the issue.
IndiaInfoline has the following Review
Though competitive dynamics may sober margin going ahead, healthy earnings growth could still continue driven by strong headline growth. The top end of the price band values the company at 21.5x annualized H1 FY13 earnings. This is significantly cheaper than extant valuation of CRISIL (33x annualized 9M CY12 earnings) and ICRA (31x annualized H1 FY13 earnings).
