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Education
Marred by questions on sustainability of the Core business models and
Corporate governance issues, there is a vacuum in the investable Indian
Education space. Rising Competitive Intensity at the higher end of the
spectrum (TutorVista) and price wars at the lower end (LearnNext), the
Education space is in a state of turmoil. Whilst the two stalwarts, Educomp
& Everonn have struggled to maintain cash flows and margins or either,
we see balance sheet quality deteriorating amidst increased working
capital intensity & dependence on debt.
Educomp
We expect Educomp to disappoint in terms of Smart Class additions (It needs to
add ~28k in 2HFY12 to meet the lower end of its guidance of 40-45k classes).
Having recognized revenues aggressively since the last few quarters, we expect
debtor days to further rise and cash flows to be further impacted.
A primary driver for Educomp is likely to be its ability (or each thereof) to tie up
funding for its Edu Smart SPV on time while maintaining the cost of borrowing.
The rising cost of borrowing is likely to further strain the income statement.
The second big driver of results will be Educomp’s ability to control costs and
ballooning debtor days in its non-core businesses.
Everonn
We have discontinued our estimates on Everonn w.e.f 21st September, 2011. We
re iterate our recommendation of selling at the current market price.
Ambit v/s Consensus
We remain slightly ahead of consensus on FY12 PAT. We are not making any
changes to our earlier estimates (published on 8th July, 2011)
Recommendation
We remain SELLers on Educomp due to the risks to the core business and its
inability to scale up its other businesses.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Education
Marred by questions on sustainability of the Core business models and
Corporate governance issues, there is a vacuum in the investable Indian
Education space. Rising Competitive Intensity at the higher end of the
spectrum (TutorVista) and price wars at the lower end (LearnNext), the
Education space is in a state of turmoil. Whilst the two stalwarts, Educomp
& Everonn have struggled to maintain cash flows and margins or either,
we see balance sheet quality deteriorating amidst increased working
capital intensity & dependence on debt.
Educomp
We expect Educomp to disappoint in terms of Smart Class additions (It needs to
add ~28k in 2HFY12 to meet the lower end of its guidance of 40-45k classes).
Having recognized revenues aggressively since the last few quarters, we expect
debtor days to further rise and cash flows to be further impacted.
A primary driver for Educomp is likely to be its ability (or each thereof) to tie up
funding for its Edu Smart SPV on time while maintaining the cost of borrowing.
The rising cost of borrowing is likely to further strain the income statement.
The second big driver of results will be Educomp’s ability to control costs and
ballooning debtor days in its non-core businesses.
Everonn
We have discontinued our estimates on Everonn w.e.f 21st September, 2011. We
re iterate our recommendation of selling at the current market price.
Ambit v/s Consensus
We remain slightly ahead of consensus on FY12 PAT. We are not making any
changes to our earlier estimates (published on 8th July, 2011)
Recommendation
We remain SELLers on Educomp due to the risks to the core business and its
inability to scale up its other businesses.
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