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With performance below expectation in Q2 FY24 and transient choppiness likely continuing in knowledge services, we have trimmed ICRA Ltd.’s earnings estimates by 2-3% for FY24/25 (downward revision could have been higher if not for upward revision in other income).
We still assume an improvement (over Q2 FY24) in ratings revenue growth and margins in coming quarters on conducive business conditions, positive pricing approach and operational improvements.
We now expect 13%/14%/17% compound annual growth rate over FY23-25 in consolidated revenue/Ebitda/profit after tax.
ICRA’s overall growth and margin performance in H2 FY24 would be a key valuation catalyst for the stock.
The company trades at 29 times one-year rolling forward price/earnings versus long-term average of 33 times.
Retain ‘Buy’ with a lowered 12 months of Rs 6300 (earlier Rs 6700).
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