ICRA Ltd is a mid-cap company having a market cap of Rs 3,572.60 deals in the financial services sector. The stock has jumped 32.79% In the last 1 year and is up by 8.73% on a year-to-date (YTD) basis. The stock has surged 4.28% in the last 6 months but is down by -0.10% in the last 1 month on the NSE. The brokerage firm HDFC Securities has placed a buy call on the stock with a target price of Rs 4195 and a time horizon of 2 quarters. The stock is currently trading at a market price of Rs 3,700.00 on the NSE.
Q3FY22 Result of ICRA
As per the brokerage "Consolidated operating income of the company increased by 11.9% YoY to Rs 86.6cr in Q3FY22 mainly due to traction in fresh business. During this quarter, bond issuances saw a growth over the corresponding quarter of the previous year supported by issues from Banks and NBFCs. The bank credit to large industry however continued to be tepid as pickup in economic activity got weighed down by supply side disruptions. Employee expenses dipped on account of attrition while other operating expenses increased (due to higher bad debts & provisions) resulting in EBITDA increase of 43% YoY to Rs 34.6cr. EBITDA margins expanded 865bps to 40%. PAT increased by 27.8% YoY to Rs 30.9cr and PAT margin expanded 440bps to 35.7%."
HDFC Securities has stated "Ratings, research, and other services segment, including foreign subsidiaries, has grown by 3.7% on y-o-y basis. Outsourced and information services segment grew by 30.8% due to increase in business from existing and new clients, whereas Consulting services de-grew by 5% due to challenges in external environment and de-focus on certain unprofitable segments of its business."
Buy for a target price of Rs 4195
The brokerage has claimed "Increasing preference of sound borrowers towards bank loan alternatives has opened additional source of revenues. The outsourced and information services business segment of ICRA is doing well and the margins have been improving. The long-term outlook for the ratings business remains positive, given the large funding requirements which would have to be raised through a combination of bank loans and bonds. ICRA is aiming to gain wallet share in focused large and mid-sized clients by being the preferred rating agency from investor's perspective."
"ICRA is well placed to benefit from the revival in credit growth. We expect ICRA's revenue/EBITDA/PAT to grow at 13/21/21% CAGR over FY21-FY24, led by demand revival in credit growth and strong uptick in outsourced business. ICRA has healthy cash and cash equivalents (FY24) on books equivalent to 19.5% of its CMP. We believe investors can buy the stock in the band of Rs 3720-3750 and add on dips to Rs 3350-3380 band (22.5x FY24E EPS) for a fair value of Rs 4195 (28x FY24E EPS) over the next 2 quarters," HDFC Securities says.
The stock has been picked from the brokerage report of HDFC Securities. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.