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Seasonally a better quarter
We expect the companies to register strong growth
during Q4FY11 as it is seasonally a better quarter. We
believe that the growth in topline would be largely
driven by the information and communication
technology (ICT) segment offering computer education
to government schools, multimedia solutions to
private schools and IT training segments. We expect
Educomp Solutions and Everonn Education to register
strong growth in sales and net profit in Q4. NIIT is
expected to report 7.5%YoY revenue growth in Q4 and
demonstrate better results from FY12E on the back of
better sales mix which would yield higher margin.
Improvement in sales mix to help maintain
operating profit margin: We do not expect any
pressure on operating profit margins in Q4FY11E.
Higher margin business would grow faster and drive
overall margin of the company.
New initiatives to continue: Companies in the
education space would continue to focus on newer
initiatives in the area of formal education and skill
development as they foresee major opportunity in
these areas. While Educomp and NIIT are working on
scaling up their sales team for growing the private
school segment, Everonn Education is working on its
skill development subsidiary and formal education to
improve growth prospects.
Prefer Career Point and Everonn in the space: We
prefer Everonn, Career Point and NIIT in order of
preference considering growth prospects, earning
surprises and valuation. We believe that financial
performance of next 2-3 quarters would be the key
trigger for stock performance. Our belief is that NIIT
re-rating is contingent on FY12E financial performance
i.e growth with margin expansion. Hence, NIIT
becomes a long-term bet in our opinion.
Career Point Infosystems (Rating – Buy; Target Price – Rs414)
We expect Career Point to post Rs197mn revenue in Q4FY11 on the back of an increase in
student enrollment.
We expect the operating margin to be 39% backed by better realization.
We expect net profit to be at Rs72mn on the back of strong top-line growth. Since the company
has IPO proceeds in its books which are unutilized, there is good probability of outperformance
to our estimates.
Educomp Solutions (Rating – Sell; Target Price – Rs425)
We expect Educomp to register 32% YoY revenue growth in Q4FY11 on the back of strong
growth in school learning segment. The company is likely to book one-time revenue of
Rs1.54bn on account of the transfer to the new model.
We expect the company to report an operating margin of 53% at consolidated level driven by
the school learning solution segment where the one time revenue would have significant
corresponding expense.
We expect net profit to grow 109.8% YoY on the back of strong top-line growth and
improvement in operating profit margin.
Everonn Education (Rating – Buy; Target Price – Rs772)
We expect Everonn to register 21% YoY revenue growth in Q4FY11 on the back of an increase in
VITELS business. Within VITELS segment, the company has shown continuous improvement in
installation per school in the ischool segment.
We expect the company to report an operating margin of 38% at the consolidated level driven
by VITELS segment which enjoys high margin. While we expect standalone business to deliver
strong operating profit margin, the new initiatives in subsidiaries can impact the overall margin
negatively.
We expect net profit to grow 33% YoY to Rs219mn on the back of strong top-line growth and
higher operating profit margin.
NIIT (Rating – Buy; Target Price – Rs74)
We expect NIIT to register 7.5% YoY revenue growth, driven by the segments – individual
learning solutions (ILS) and corporate learning solutions (CLS)
Operating margin is expected to contract by ~200bp mainly due to the introduction of new
delivery platforms at centers and higher SG&A expenses which would help in higher sales
growth and better margin going forward.
We expect net profit to decline 24% YoY on the back of lower operating margin and higher
depreciation expense.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Seasonally a better quarter
We expect the companies to register strong growth
during Q4FY11 as it is seasonally a better quarter. We
believe that the growth in topline would be largely
driven by the information and communication
technology (ICT) segment offering computer education
to government schools, multimedia solutions to
private schools and IT training segments. We expect
Educomp Solutions and Everonn Education to register
strong growth in sales and net profit in Q4. NIIT is
expected to report 7.5%YoY revenue growth in Q4 and
demonstrate better results from FY12E on the back of
better sales mix which would yield higher margin.
Improvement in sales mix to help maintain
operating profit margin: We do not expect any
pressure on operating profit margins in Q4FY11E.
Higher margin business would grow faster and drive
overall margin of the company.
New initiatives to continue: Companies in the
education space would continue to focus on newer
initiatives in the area of formal education and skill
development as they foresee major opportunity in
these areas. While Educomp and NIIT are working on
scaling up their sales team for growing the private
school segment, Everonn Education is working on its
skill development subsidiary and formal education to
improve growth prospects.
Prefer Career Point and Everonn in the space: We
prefer Everonn, Career Point and NIIT in order of
preference considering growth prospects, earning
surprises and valuation. We believe that financial
performance of next 2-3 quarters would be the key
trigger for stock performance. Our belief is that NIIT
re-rating is contingent on FY12E financial performance
i.e growth with margin expansion. Hence, NIIT
becomes a long-term bet in our opinion.
Career Point Infosystems (Rating – Buy; Target Price – Rs414)
We expect Career Point to post Rs197mn revenue in Q4FY11 on the back of an increase in
student enrollment.
We expect the operating margin to be 39% backed by better realization.
We expect net profit to be at Rs72mn on the back of strong top-line growth. Since the company
has IPO proceeds in its books which are unutilized, there is good probability of outperformance
to our estimates.
Educomp Solutions (Rating – Sell; Target Price – Rs425)
We expect Educomp to register 32% YoY revenue growth in Q4FY11 on the back of strong
growth in school learning segment. The company is likely to book one-time revenue of
Rs1.54bn on account of the transfer to the new model.
We expect the company to report an operating margin of 53% at consolidated level driven by
the school learning solution segment where the one time revenue would have significant
corresponding expense.
We expect net profit to grow 109.8% YoY on the back of strong top-line growth and
improvement in operating profit margin.
Everonn Education (Rating – Buy; Target Price – Rs772)
We expect Everonn to register 21% YoY revenue growth in Q4FY11 on the back of an increase in
VITELS business. Within VITELS segment, the company has shown continuous improvement in
installation per school in the ischool segment.
We expect the company to report an operating margin of 38% at the consolidated level driven
by VITELS segment which enjoys high margin. While we expect standalone business to deliver
strong operating profit margin, the new initiatives in subsidiaries can impact the overall margin
negatively.
We expect net profit to grow 33% YoY to Rs219mn on the back of strong top-line growth and
higher operating profit margin.
NIIT (Rating – Buy; Target Price – Rs74)
We expect NIIT to register 7.5% YoY revenue growth, driven by the segments – individual
learning solutions (ILS) and corporate learning solutions (CLS)
Operating margin is expected to contract by ~200bp mainly due to the introduction of new
delivery platforms at centers and higher SG&A expenses which would help in higher sales
growth and better margin going forward.
We expect net profit to decline 24% YoY on the back of lower operating margin and higher
depreciation expense.
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