Crisil, the domestic rating and research arm of analytical giant S&P Global has seen its stock slip 5.7% so far this year, faring worse than the headline indices. However, analysts at Edelweiss have retained their ‘buy’ rating on the scrip while having trimmed the target price. Earlier last week Crisil had announced its quarterly results where the company had reported strong growth in income and profits. Crisil had also announced a dividend. Ace investor Rakesh Jhunjhunwala owns a 5.5% stake in Crisil and has maintained his shareholding over the last few quarters.
Business outlook remains strong
“With improving corporate Capex and additional levers with ESG ratings, the outlook for the domestic rating business is improving,” analysts at Edelweiss said. They added that double-digit growth in the research segment will lead to margin leverage. Crisil has maintained its leadership in corporate bonds and added new clients during the quarter. Rating revenue for Crisil was up 9.5% on-year basis. The domestic rating business has grown stronger with improved bank loan ratings driven by improving wholesale credit growth, credit ratio and debt refinancing.
The research business of Crisil has also witnessed strong sales. Research sales shot up 21.5% on-year in the October-December quarter and 20.3% in all of 2021. The growth was helped by the Global Research and Risk Solutions business on the back of increased demand in regulatory reporting, product control and buy-side research. India research grew with improved economic activity. Management expects sustenance of early double-digit sales growth and 100bp EBIT margin expansion per year, according to Edelweiss.
Target price
Crisil share price was down at Rs 2,700 on Tuesday. “We remain positive on CRISIL’s ratings and research driving profitability, enabling overall sales and PAT CAGR of 12/17% over CY21–23E. But, the best of earnings growth will likely taper by CY23 and global growth to ease,” said Edelweiss. The brokerage firm has a ‘Buy’ rating on the scrip with a revised target price of Rs 3,350. This implies an upside of 24% from today’s low.
Rakesh Jhunjhunwala’s stake in Crisil
Big bull Rakesh Jhunjhunwala owns 40 lakh equity shares of Crisil along with his wife Rekha Jhunjhunwala. The couple owns a combined 5.49% stake in the company. Rakesh Jhunjhunwala’s stake in the company has remained largely the same over the last few quarters with marginal changes. The value of big bull’s stake in the company stands at Rs 1,080 crore.
