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Margin expansion on better sales mix
Everonn Education’s (Everonn) Q3FY11 results were in line
with our expectation. We believe investment in
subsidiaries such as Everonn Skill Development (ESDL),
Everonn School (ESL) and Everonn Business Education
(EBEL) will be key catalysts going forward. We re-iterate
Buy rating on the stock.
Results in line with expectations: Sales grew 44% to
Rs1,153mn against our estimate of Rs1,207mn (deviation
was mainly due to lower sales of Edures, a subsidiary). The
growth was mainly contributed by VITELS which grew by
56% YoY. EBITDA margin expanded by 318bps to 38%, a
tad better than our expectation.
Standalone business maintains growth rate: Everonn
reported 45.2% YoY growth in sales in its standalone
business to Rs857mn with both ICT and VITELS
contributing. The company managed to improve its
operating profit margin by 618bp to 53.8% on a YoY basis.
We believe that favourable change in sales mix led to this
improvement.
Subsidiaries in investment mode: Everonn is investing
in its subsidiaries Everonn Business Education and
Everonn Skill Development among others. Other than
Edures and Topper, subsidiaries, the company incurred
EBITDA losses of Rs51.4mn during Q3FY11.
Reiterate Buy; maintain target price Rs772: At the CMP,
the stock trades at 11.6x FY12E earnings estimates
(considering dilution from SKIL investment) which we
believe is attractive considering the improvement in
financial performance. We reiterate Buy on the stock as we
see triggers which can expand earnings estimates.
Growth momentum continues for Everonn (standalone) business
Everonn registered 45.2% YoY growth in sales on the back of strong growth in VITELS. The VITELS
business grew by 56% YoY to Rs636mn in Q3FY11 on the back of strong addition of schools and
colleges. In the quarter, the company added 140 schools and 63 colleges across India.
We believe that performance on VITELS is well on track as indicated by management. Some key
points which indicate growth prospects are:
iSchools – The management indicated that the average installation per classroom for the
iSchool product had increased to 2.9 classes from 2.5 per school in Q2FY11.
Colleges – The college segment continues to remain strong with the addition of 63 colleges.
The company intends to increase classrooms per college from 1.1 to 5 over a 5-year period.
Retail (Kompass) – It added 5 centres in the quarter to reach 59 centres signalling strong
growth momentum. The segment witnessed 62% YoY growth in revenue to Rs310mn.
Investment in subsidiaries and new initiatives
In Q3FY11, its subsidiaries reported PBT loss of 36mn as some new initiatives including Everonn
Business Education (EBEL), Everonn School (ESL), Everonn Skill Development (ESDL) were in the
investment phase. The newer initiatives incurred a loss of Rs51mn at EBITDA level. The performance
in this segment is likely to pick up in subsequent years and is likely to break even in 1HFY12E.
Risk to our earnings estimates
As we do not have clarity on the revenue model of some of the subsidiaries, our estimates are
conservative and subject to change based on more detailed understanding of management
strategy. Hence, we see this as an upside risk to our current estimates.
Reiterate Buy
At the CMP, the stock trades at 11.6x FY12E and 9.2x FY13E earnings estimates (considering full
dilution). The company is gearing up to ride the government’s ambitious plans to increase spending
on vocational training in the country. Also, we see increase in revenue per point of presence in
VITELS and “Educating India” as key triggers. We reiterate Buy rating on the stock and revise our
target price to Rs 772 per share as we upgrade our earnings, implying 60% upside.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Margin expansion on better sales mix
Everonn Education’s (Everonn) Q3FY11 results were in line
with our expectation. We believe investment in
subsidiaries such as Everonn Skill Development (ESDL),
Everonn School (ESL) and Everonn Business Education
(EBEL) will be key catalysts going forward. We re-iterate
Buy rating on the stock.
Results in line with expectations: Sales grew 44% to
Rs1,153mn against our estimate of Rs1,207mn (deviation
was mainly due to lower sales of Edures, a subsidiary). The
growth was mainly contributed by VITELS which grew by
56% YoY. EBITDA margin expanded by 318bps to 38%, a
tad better than our expectation.
Standalone business maintains growth rate: Everonn
reported 45.2% YoY growth in sales in its standalone
business to Rs857mn with both ICT and VITELS
contributing. The company managed to improve its
operating profit margin by 618bp to 53.8% on a YoY basis.
We believe that favourable change in sales mix led to this
improvement.
Subsidiaries in investment mode: Everonn is investing
in its subsidiaries Everonn Business Education and
Everonn Skill Development among others. Other than
Edures and Topper, subsidiaries, the company incurred
EBITDA losses of Rs51.4mn during Q3FY11.
Reiterate Buy; maintain target price Rs772: At the CMP,
the stock trades at 11.6x FY12E earnings estimates
(considering dilution from SKIL investment) which we
believe is attractive considering the improvement in
financial performance. We reiterate Buy on the stock as we
see triggers which can expand earnings estimates.
Growth momentum continues for Everonn (standalone) business
Everonn registered 45.2% YoY growth in sales on the back of strong growth in VITELS. The VITELS
business grew by 56% YoY to Rs636mn in Q3FY11 on the back of strong addition of schools and
colleges. In the quarter, the company added 140 schools and 63 colleges across India.
We believe that performance on VITELS is well on track as indicated by management. Some key
points which indicate growth prospects are:
iSchools – The management indicated that the average installation per classroom for the
iSchool product had increased to 2.9 classes from 2.5 per school in Q2FY11.
Colleges – The college segment continues to remain strong with the addition of 63 colleges.
The company intends to increase classrooms per college from 1.1 to 5 over a 5-year period.
Retail (Kompass) – It added 5 centres in the quarter to reach 59 centres signalling strong
growth momentum. The segment witnessed 62% YoY growth in revenue to Rs310mn.
Investment in subsidiaries and new initiatives
In Q3FY11, its subsidiaries reported PBT loss of 36mn as some new initiatives including Everonn
Business Education (EBEL), Everonn School (ESL), Everonn Skill Development (ESDL) were in the
investment phase. The newer initiatives incurred a loss of Rs51mn at EBITDA level. The performance
in this segment is likely to pick up in subsequent years and is likely to break even in 1HFY12E.
Risk to our earnings estimates
As we do not have clarity on the revenue model of some of the subsidiaries, our estimates are
conservative and subject to change based on more detailed understanding of management
strategy. Hence, we see this as an upside risk to our current estimates.
Reiterate Buy
At the CMP, the stock trades at 11.6x FY12E and 9.2x FY13E earnings estimates (considering full
dilution). The company is gearing up to ride the government’s ambitious plans to increase spending
on vocational training in the country. Also, we see increase in revenue per point of presence in
VITELS and “Educating India” as key triggers. We reiterate Buy rating on the stock and revise our
target price to Rs 772 per share as we upgrade our earnings, implying 60% upside.
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