Organised play in unorganised industry… Management Meet Note

Transcription

Management Meet Note
November 17, 2014
Rating matrix
Rating
Target
Target Period
Potential Upside
:
:
:
:
MT Educare (MTEDU)
Unrated
NA
NA
NA
Organised play in unorganised industry…
Key Financials
| Crore
Net Sales
EBITDA
Net Profit
EPS (|)
FY11
105.5
19.0
8.0
2.4
FY12
130.6
23.1
12.8
3.8
FY13
157.3
29.3
17.8
4.6
FY14
201.8
42.3
20.8
5.3
FY11
57.6
4.9
27.3
11.4
33.5
40.8
FY12
36.2
4.0
22.5
9.5
24.5
26.4
FY13
29.9
3.3
17.7
5.3
22.5
23.9
FY14
25.7
2.6
12.3
4.8
19.5
26.2
Valuation summary
P/E
EV / Revenues
EV / EBITDA
P/BV
RoNW (%)
RoCE (%)
Stock data
Particular
Market Capitalization (| Crore)
Total Debt (Sep-14) (| Crore)
Cash and Investments (Sep-14) (| Crore)
EV (| Crore)
52 week H/L
Equity capital
Face value
Amount
540.7
21.0
519.7
144 / 90
39.8
10.0
Price performance (%)
MT Educare
TreeHouse Edu
Zee Learn
Repro India
| 136
1M
3M
6M
12M
7.3
(9.9)
0.4
(9.7)
35.9
(0.5)
12.5
31.2
47.9
17.7
9.6
38.0
112.4
67.5
44.8
62.7
Analyst
Abhishek Shindadkar
[email protected]
Hardik Varma
[email protected]
We met Yagnesh Sanghrajka, CFO, MT Educare, to understand the
company’s business model and future prospects. The company was
started as “Mahesh Tutorials” by current founder and CEO, Mahesh
Shetty, in 1988, and focused on school coaching in Mumbai. Over the
years, the company has widened its geographical presence – expanded
to other states such as Karnataka, Andhra Pradesh, Gujarat, Punjab,
Haryana, Delhi, Tamil Nadu – and business segments (school - 44% of
revenues, science - 25%, commerce - 18%, MBA, Robomate products) by
bringing pan-India curriculum experts under MT’s umbrella. Growth
momentum was helped by a combination of organic growth (opening of
Mangalore pre-university, PU, campus to offer XI, XII and engineering
coaching), and acquisitions such as Chitale Personalised Learning Centre
(2011, MBA coaching, Mumbai), Lakshya (FY13, Advanced IIT,
Chandigarh) and Sri Gayatri Education Society (FY14, engineering, AP).
Karnataka, Lakshya may be game changer for science vertical
The management commentary suggests that changes in IIT/engineering
admission procedure could present significant opportunities for pan-India
players like MT Educare and help accelerate growth. Note, the company
operates a pre-university (PU) tie-up model wherein it provides test prep
coaching for engineering and medical entrance exams post college hours
using campus premises in a revenue sharing model. Currently, 14 such
operational college tie-ups exist in Karnataka, which the management
hopes to raise to 30 by FY18E. MT also built a PU college at Mangalore
with a capacity of 3,000 students (current utilisation, 55%) accompanied
by a hostel facility. The planned capex of | 60 crore was funded through
internal accruals, while the company plans to lease back the facility by
FY15E end. Further, acquisition of Lakshya (focusing on IIT advanced testprep) in the North could bear fruit as the company plans to leverage the
brand and expand it to other geographies (Mumbai, Pune, Kolhapur,
Nashik and Karnataka). MT also plans to launch foundation courses
(Standard VIII-X) in Mumbai to act as a feeder for IIT advanced batches.
Noticeably, the company is seeing healthy conversions from X to XI
students and suggests excellent brand recall for MT.
Healthy balance sheet metrics, dividend payout ratio
MT’s revenues, PAT grew at 23%, 51% CAGR during FY09-14 to | 201.8
crore, | 20.8 crore, respectively, while EBITDA margins expanded 8.5
percentage points (pp) to 21.1% vs. 12.6% in FY09. The company
increased its dividend payout ratio to ~43% in FY14 vs. ~18% in FY11
with RoEs of ~20% in FY14.
Exhibit 1: Financial performance
Income from operations (| crore)
EBITDA (| crore)
Net profit (| crore)
FY12
FY13
FY14
130.6
157.3
201.8
19.0
23.1
29.3
42.3
8.0
12.8
17.8
20.8
EPS (|) - diluted
PE (x)
2.4
3.8
4.6
5.3
57.6
36.2
29.9
25.7
EV to EBITDA(x)
27.3
22.5
17.7
12.3
RoNW (%)
33.5
24.5
22.5
19.5
RoCE (%)
40.8
26.4
23.9
26.2
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research
FY11
105.5
Getting foothold in AP via tie-up with Shree Gayatri Educational Society
The company plans to replicate the Karnataka model in Andhra Pradesh,
albeit through its partnership with Shree Gayatri Educational Society
(SGES). SGES has ~33,000 students (9,000 residential, 24,000 day
students) spread across 71 locations and 51 centres. It offers four types of
courses, starting from the regular batch (state board) to advanced IIT
preparation. Current realisation rates are generally lower than local peers
while MT sees scope for improvement given the improving revenue mix
towards advanced courses and as its leverages the strength of the
Lakshya brand. The management expects incremental revenue
contribution of | 50 crore from SGES in FY15E.
Contrary to industry, no “Star” teacher concept in MT…
While majority of the coaching institutes in the country have a “Star”
teacher concept, who act as crowd-pullers, MT does not work on one but
“many”. Lecturers at MT comprise full-time and visiting faculties who are
offered training to ensure uniformity and work on set standards of the
institute (100-150 hours training for school coaching, 250-300 hours for
test preparation). As of FY14, MT Educare employed ~1,300 teachers vs.
892 in FY12, a CAGR of 21% while employee costs have risen from | 18
crore in FY12 to | 28.6 crore in FY14, led by increased teacher intake,
training costs and rising salary
Robomate – future growth engine in schools
Though revenues in the schools division are highly concentrated in the
Mumbai region, MT plans to widen its presence across Maharashtra
through the franchisee model. Recently, the company also started selling
Robomate products – online content delivery developed in controlled
environment – to reach non-MT students. The product offering is
available across all verticals (engineering, medical, CA) at prices ranging
from | 20,000 - | 75,000. Till date, Robomate registered sales of | 2.5
crore.
Exhibit 2: Revenues grow at 23% CAGR during FY09-14
250
28.3
26.8
24
23.8
20.4
150
18
%
| crores
200
13.7
100
12
6
50
0
30
73.2
83.2
105.5
130.6
157.3
201.8
FY09
FY10
FY11
FY12
FY13
FY14
Revenue
0
Growth, YoY
Page 2
Exhibit 3: EBITDA margins improve 8.5 pp during FY09-14
25
45
21.1
18.0
15.5
27
18.6
17.7
20
15
12.6
%
| crores
36
10
18
5
9
0
9.2
12.9
19.0
23.1
29.3
42.5
FY09
FY10
FY11
FY12
FY13
FY14
EBITDA
0
EBITDA margin (%)
Exhibit 4: PAT grows at 51% CAGR during FY09-14 led by higher margins
25
15
15
10.3
6
3.6
5
9
7.6
6.3
10
0
12
11.3
9.8
%
| crores
20
3
2.6
5.2
8.0
12.8
17.8
20.8
FY09
FY10
FY11
FY12
FY13
FY14
PAT
0
PAT margin (%)
Exhibit 5: School revenues grow at 21% CAGR during FY12-14 led by higher realisations
40,000
100
88.0
38,000
36,000
80
70.4
70
60
34,841
33,224
60.0
x
| crores
90
34,000
32,000
31,774
30,000
50
FY12
FY13
School revenue
FY14
School enrolments
Page 3
Exhibit 6: Rising enrolments in test prep led to 24% CAGR in science revenues during FY12-14
60
14,524
36
14,400
40.1
14,175
32.6
14,000
x
| crores
48
14,800
50.3
24
13,600
13,511
13,200
12
12,800
0
FY12
FY13
Science revenue
FY14
Science enrolments
Exhibit 7: Commerce revenues grow at 19% CAGR in FY12-14 led by higher student enrolments
60
30,000
36
28,000
37.2
32.6
26.4
25,178
24
26,000
x
| crores
48
24,000
22,088
12
22,000
20,236
0
FY12
20,000
FY13
Commerce revenue
FY14
Commerce enrolments
Page 4
Exhibit 8: Geographical distribution of centres across India - dominant presence in Maharashtra
Page 5
Financial summary
Profit and loss statement
(| crores)
Total Revenues
| Crore
FY11
105.5
Growth (%)
27
Total Operating Expenditure
EBITDA
86.5
19.0
FY12
130.6
FY13
157.3
24
107.5
23.1
Cash flow statement
FY14
201.8
20
28
128.0
29.3
159.5
42.3
Growth (%)
(77)
21
27
44
Depreciation & Amortization
8.3
7.8
8.6
12.8
(| crores)
Equity
FY12
35
Reserves & Surplus
13
22
62
72
Networth
48
57
101
112
Minority Interest
0
0
(0)
(1)
LT liabilties & provisions
Source of funds
4
53
6
63
9
110
4
115
Other Income
2.1
4.0
4.7
2.4
Interest costs
PBT before Exceptional Items
(0.0)
12.8
(0.0)
19.2
25.4
0.0
31.9
Goodwill
Growth (%)
74
NM
NM
NM
Other non current assets
Tax
PAT before Exceptional Items
4.8
8.0
6.4
12.8
7.6
17.8
11.1
20.8
Loans and advances
Exeptional items
PAT before MI
8.0
12.8
17.8
20.8
Current Investments
Minority Int & Pft. from associates
PAT
8.0
0
12.8
17.8
20.8
Cash & Cash equivalents
Growth (%)
53
61
39
17
Current liabilities
EPS
EPS (Growth %)
2.4
55
3.8
59
4.6
21
5.3
16
| Crore
FY12
35
Reserves & Surplus
13
22
62
72
Networth
48
57
101
112
Minority Interest
0
0
(0)
(1)
LT liabilties & provisions
Source of funds
4
53
6
63
9
110
4
115
Goodwill
Long term loans and advances
Long term loans and advances
Inventories
Debtors
Other current assets
FY14
40
34
47
79
94
1
1
1
13
10
14
30
20
0
0
0
-
7
26
12
20
-
-
0
0
23
11
15
11
5
6
10
9
21
18
24
10
0
0
0
0
45
53
51
43
Provisions
8
14
17
24
Net current assets
Application of funds
3
53
(6)
63
(6)
110
(17)
115
FY13
40
FY11
FY12
FY13
FY14
5.3
Key ratios
FY11
34
Net fixed assets
Net fixed assets
FY13
40
Balance sheet
(| crores)
Equity
| Crore
FY11
34
FY14
40
(Year-end March)
Per share data (|)
EPS-diluted
2.4
3.8
4.6
Cash per share
10.9
7.1
9.9
5.3
BV
12.0
14.4
25.4
28.2
2.0
0.8
1.8
3.8
DPS
Operating Ratios (%)
34
47
79
94
EBITDA Margin
18.0
17.7
18.6
21.0
1
1
1
13
Adjusted PBT Margin
12.2
14.7
16.1
15.8
10
14
30
20
Adjusted PAT Margin
Return Ratios (%)
7.6
9.8
11.3
10.3
Other non current assets
0
0
0
-
Loans and advances
7
26
12
20
RoNW
33.5
24.5
22.5
19.5
Inventories
-
-
0
0
RoCE
40.8
26.4
23.9
26.2
23
11
15
11
42.4
28.8
25.0
21.4
5
6
10
9
RoIC
Valuation Ratios (x)
21
18
24
10
P/E
57.6
36.2
29.9
25.7
0
0
0
0
EV / EBITDA
27.3
22.5
17.7
12.3
45
53
51
43
Price to Book Value
11.4
9.5
5.3
4.8
Provisions
8
14
17
24
EV/Total Revenues
4.9
4.0
3.3
2.6
Net current assets
Application of funds
3
53
(6)
63
(6)
110
(17)
115
MCap/Total Revenues
Turnover Ratios
5.1
4.1
3.4
2.7
Debtor days
18
16
19
17
4
3
4
5
Current Investments
Debtors
Cash & Cash equivalents
Other current assets
Current liabilities
Creditors days
Solvency Ratios
Total Debt / Equity
0.1
-
-
-
Current Ratio
1.1
0.9
0.9
0.7
Quick Ratio
Debt / EBITDA
1.1
0.2
0.9
0.9
-
0.7
-
-
.
Page 6
RATING RATIONALE
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Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
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Head – Research
[email protected]
ICICIdirect.com Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
[email protected]
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reflect our personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific
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Page 7

Organised play in unorganised industry… Management Meet Note

Transcription

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