Emkay calls a ‘Buy’ on CRISIL CMP: Rs. 936 Target Rs. 1050
CRISIL’s Q4CY11 revenue came in at Rs 2.2bn, inline with expectation. However net profit at Rs 498mn was slightly below expectation led by higher opex. Research continues to grow at a strong pace at 34%yoy, while rating grew by a moderate 14%yoy. Continued momentum in IREVNA & leverage on pipal bus to drive research rev further. Op margins contracted by 149bps qoq to 33.5% led by 313/ 117 bps contraction in rating and research margins. Resultantly op profit grew by 3.9%yoy, slightly below exp. Strong cash flow generation capabilities of the company should continue to support the expensive valuations. Maintain BUY rating on the stock with PT of Rs1050
Revenue growth inline with expectation: CRISIL Q4CY11 revenue at Rs2.2bn (up 26.1% yoy and 4.7% qoq) was inline with our expectation. This growth in revenue was led by 34% yoy (4.9% qoq) growth in research and information services segment and 14.1%yoy growth in rating revenues. Advisoryservices at Rs162mn were up 7% yoy .
Pick up in debt issuances to aid growth in rating revenues in CY12: Rating revenues grew at a moderate pace in CY11 led by lower debt activity on account of highly volatile interest rate environment. However with interest rate cycle peaking out, debt issuances are likely to increase in CY12, hence aiding growth in rating revenues. Debt issuance has already improved in September and December quarter with 28-30%yoy growth in volumes. Moreover with continued traction in IREVNA and Pipalresearch, growth in research is also likely to remain strong in CY12 as well. Completes Buyback worth Rs795mn: CRISIL completed its buyback of 0.9mn shares at an average price of 871 in December 2011, totaling to Rs 795mn. Resultantly the equity capital came down from Rs 70.9mn to 70.1mn. CRISIL completed its previous buy back between Nov 3-10, 2010 of 128,156 (1,281,560 post split) shares at an average price of Rs 6,200 (Rs620 post split), totalling to Rs 795mn. The frequent buyback’s resembles strong operating cash flow position of the company. The average operating cash flow over the last four years stood at a strong Rs 2.8bn. Valuation and view: While at 27x CY12E EPS the valuations look quite expensive, we believe that the strong cash flow generation capabilities of the company should continue to support the expensive valuations. We maintain our BUY rating on the stock with price target of Rs 1050.
First Call Research calls a ‘Buy’ on Dr. Reddy Lab CMP: Rs. 1643 Target Rs. 1864
Dr. Reddy’s Laboratories Ltd. is an integrated global pharmaceutical company which provides affordable & innovative medicines for healthier lives. During the quarter, the robust growth of Net Profit is increased by 87.80% to Rs.5129.60 million. During the quarter, the company launched 33 new generic products, filed 16 new product registrations and filed 7 DMFs globally. Dr. Reddy’s has got the final approval of its olanzapine 20 mg tablets, the generic version of Eli Lilly’s Zyprexa® from the USFDA. Net Sales and PAT of the company are expected to grow at a CAGR of 17% and 71% over 2010 to 2013E respectively.
Investment Highlights: Q3 FY12 Results Update: Dr. Reddy’s Lab. has reported consolidated net profit of Rs 5129.60 million for the quarter ended on December 31, 2011 as against Rs. 2731.40 million in the same quarter last year, an increase of 87.80%. It has reported net sales of Rs 27691.90 million for the quarter ended on December 31, 2011 as against Rs 18985.10 million in the same quarter last year, a rise of 45.86%. Total income grew by 45.22% to Rs. 27856.70 million from Rs.19183.00 million in the same quarter last year. During the quarter, it reported earnings of Rs 30.26 a share.
Net Sales & PAT growth: During the quarter, Net sales rose by 45.86% to Rs.27691.90 million from Rs.18985.10 in the same the quarter last year and the Total Profit for quarter ended December 2011 was Rs. 5129.60 million grew by 87.80% from Rs. 2731.40 million compared to same quarter last year.
Outlook and Conclusion: At the current market price of Rs.1650.00, the stock is trading at 17.95 x FY12E and 15.73 x FY13E respectively. Earning per share (EPS) of the company for the earnings for FY12E and FY13E is seen at Rs.91.95 and Rs.104.92 respectively. Net Sales and PAT of the company are expected to grow at a CAGR of 17% and 71% over 2010 to 2013E respectively. On the basis of EV/EBITDA, the stock trades at 14.10 x for FY12E and 12.28 x for FY13E. Price to Book Value of the stock is expected to be at 5.00 x and 3.80 x respectively for FY12E and FY13E. We expect that the company will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs. 1864.00 for Medium to Long term investment.