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Polishing Skills
We attended the analysts meet of Everonn Education
which was organized to share the details of National
Skill Development Corporation’s (NSDC) JV with
Everonn Skill Development (ESDL), a subsidiary of
Everonn. As per the JV, NSDC will hold 27% stake in the
company. While NSDC is to train 150mn workforce by
2022, ESDL has got the mandate to train 10% or 15mn
people across various industries. We believe this event
bodes well for the company in terms of growth
prospects though it would take time for it to scale up the
volume. We revise our target price to Rs854 against the
existing target price of Rs772 to factor in business from
this initiative.
NSDC JV with ESDL, a subsidiary of Everonn
Education: NSDC will hold 27% stake in the subsidiary
of Everonn Education. ESDL has the mandate to train
15mn people over 10 years across various industries
with the duration of the course ranging from 1-6
months. The management expects the opportunity to
be worth around Rs150bn considering average
realization of Rs9,000-10,000 per person. However, we
believe that this is a mandate and not an order book for
the company.
Revision in earnings: We expect this development to
add around Rs1.2bn and Rs37mn to revenue and net
profit respectively for FY12E. Thus we revise our net
profit upward by 12/14% for FY12E/FY13E. We assume a
capex of Rs1.6bn for the next two years in this initiative
against management indication of Rs1.5bn over the
next three years.
Reiterate Buy: We believe the current valuation of
12.3x FY13E earnings estimates (ex-NSDC JV financials)
is attractive considering the growth prospects of the
company. The company has been consistency working
to improve business prospects which is visible in the last
couple of year’s financial performance and the
strengthening of its team.
Details of NSDC deal with EDSL
NSDC is a non profit organization set up by Ministry of Finance. It has a target of skilling/upskilling
150 mn people in India by 2022, mainly by fostering private sector initiatives in skill development
programmes and providing viability gap funding. Under this deal, NSDC would hold 27% stake
(stake for Rs141.4mn) in EDSL, a subsidiary of Everonn Education and has been mandated to train
15mn people by 2022. The total investment required to set up 271 multi skilled development
centres across country is estimated at 1.54bn. NSDC would offer loans of Rs1,013.4mn to EDSL as its
contribution.
Key details
The course would cover nine core sectors such as Textile and Apparel, Retail, Hospitality,
Automobile, Healthcare, Construction, IT and ITES, Basic Engineering, Multimedia
Initially, the courses will be offered in Gujarat, Maharashtra, Andhra Pradesh, Karnataka and
Tamil Nadu states.
The training will be imparted through brick and mortar as well as technology enabled delivery
wherever necessary
ESDL & NSDC will assist the needy and deserving candidates in availing Bank Loan facility
Duration of course would range from 1-6 months
Average realization per person per course would be approx. Rs9,000
The company will target people for training, re-skilling and up-skilling from tier – II and tier – III
locations, based on placement assurances which would come through industry, trade bodies and
NGOs tie-ups.
While this deal offers a huge potential for Everonn, we believe it would take time for the company to
source people and train them. Hence, volume would be lower in the initial 1-3 years.
Revised estimates
We are revising our estimates to factor in financials from the NSDC deal. While we maintain
estimates for other businesses, we have added revenue and profits from new initiatives. As we
expect the skill development initiative to take time to scale up, we assume 150,000 and 2,00,000
people would get trained by EDSL during FY12E and FY13E respectively. The overall EBITDA margin
is expected to come down as the skill development business would deliver lower margins.
Re-iterate Buy
We re-iterate Buy rating on the stock considering the consistent improvement in the company’s
business prospects. The stock currently trades at 12.3x FY13E earnings estimates (ex NSDC-EDSL
deal) offering upside potential considering consistent performance and future growth potential.
Newer initiatives such as the recently bagged Microsoft and NSDC deals suggest that the company
has the potential to maintain its growth momentum. We are changing our target price to Rs854 to
factor in changes in earnings estimates.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Polishing Skills
We attended the analysts meet of Everonn Education
which was organized to share the details of National
Skill Development Corporation’s (NSDC) JV with
Everonn Skill Development (ESDL), a subsidiary of
Everonn. As per the JV, NSDC will hold 27% stake in the
company. While NSDC is to train 150mn workforce by
2022, ESDL has got the mandate to train 10% or 15mn
people across various industries. We believe this event
bodes well for the company in terms of growth
prospects though it would take time for it to scale up the
volume. We revise our target price to Rs854 against the
existing target price of Rs772 to factor in business from
this initiative.
NSDC JV with ESDL, a subsidiary of Everonn
Education: NSDC will hold 27% stake in the subsidiary
of Everonn Education. ESDL has the mandate to train
15mn people over 10 years across various industries
with the duration of the course ranging from 1-6
months. The management expects the opportunity to
be worth around Rs150bn considering average
realization of Rs9,000-10,000 per person. However, we
believe that this is a mandate and not an order book for
the company.
Revision in earnings: We expect this development to
add around Rs1.2bn and Rs37mn to revenue and net
profit respectively for FY12E. Thus we revise our net
profit upward by 12/14% for FY12E/FY13E. We assume a
capex of Rs1.6bn for the next two years in this initiative
against management indication of Rs1.5bn over the
next three years.
Reiterate Buy: We believe the current valuation of
12.3x FY13E earnings estimates (ex-NSDC JV financials)
is attractive considering the growth prospects of the
company. The company has been consistency working
to improve business prospects which is visible in the last
couple of year’s financial performance and the
strengthening of its team.
Details of NSDC deal with EDSL
NSDC is a non profit organization set up by Ministry of Finance. It has a target of skilling/upskilling
150 mn people in India by 2022, mainly by fostering private sector initiatives in skill development
programmes and providing viability gap funding. Under this deal, NSDC would hold 27% stake
(stake for Rs141.4mn) in EDSL, a subsidiary of Everonn Education and has been mandated to train
15mn people by 2022. The total investment required to set up 271 multi skilled development
centres across country is estimated at 1.54bn. NSDC would offer loans of Rs1,013.4mn to EDSL as its
contribution.
Key details
The course would cover nine core sectors such as Textile and Apparel, Retail, Hospitality,
Automobile, Healthcare, Construction, IT and ITES, Basic Engineering, Multimedia
Initially, the courses will be offered in Gujarat, Maharashtra, Andhra Pradesh, Karnataka and
Tamil Nadu states.
The training will be imparted through brick and mortar as well as technology enabled delivery
wherever necessary
ESDL & NSDC will assist the needy and deserving candidates in availing Bank Loan facility
Duration of course would range from 1-6 months
Average realization per person per course would be approx. Rs9,000
The company will target people for training, re-skilling and up-skilling from tier – II and tier – III
locations, based on placement assurances which would come through industry, trade bodies and
NGOs tie-ups.
While this deal offers a huge potential for Everonn, we believe it would take time for the company to
source people and train them. Hence, volume would be lower in the initial 1-3 years.
Revised estimates
We are revising our estimates to factor in financials from the NSDC deal. While we maintain
estimates for other businesses, we have added revenue and profits from new initiatives. As we
expect the skill development initiative to take time to scale up, we assume 150,000 and 2,00,000
people would get trained by EDSL during FY12E and FY13E respectively. The overall EBITDA margin
is expected to come down as the skill development business would deliver lower margins.
Re-iterate Buy
We re-iterate Buy rating on the stock considering the consistent improvement in the company’s
business prospects. The stock currently trades at 12.3x FY13E earnings estimates (ex NSDC-EDSL
deal) offering upside potential considering consistent performance and future growth potential.
Newer initiatives such as the recently bagged Microsoft and NSDC deals suggest that the company
has the potential to maintain its growth momentum. We are changing our target price to Rs854 to
factor in changes in earnings estimates.
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