MT Educare: Things to know before Investing!!!

Hello Friends,
Everyone knows that India is one of the most attractive emerging markets in the global arena. With a population of 130 crores and a growth rate of 7 %, we are aggressively moving towards becoming a Developed economy and a super power. Of the total population of 13o crores, 43.7 Crores people are under the age of 21 i.e of school and college goers, which comes to one-third of the total population. This clearly indicates that the India education sector is poised to grow at an attractive rate so as to match the high demand & quality education needs of the people of our country.

The Indian education sector can be broadly categorized into formal education which compromises schools & colleges and non-formal education which compromises of pre-schools, coaching industry, vocational training & E-learning. Looking into non-formal education sector, coaching centers & digital education (E-learning) are the two most attractive areas with enormous growth potentials. As per Industry sources, the Indian coaching industry is expected to grow at CAGR (Compounded Annual Growth Rate) of 13 % from Rs. 1,753 billion in FY 2016 to Rs. 3,280 billion by FY 2021 and the Indian digital education industry is expected to grow at CAGR of 33 % from Rs. 24 billion in 2015 to Rs. 100 billion by FY 2020.

The initiatives taken by the central government like Skill India initiative - 'Kaushal Bharat, Kushal Bharat’, Pradhan Mantri Kaushal Vikas Yojana’ (PMKVY), National Policy for SkillDevelopment and Entrepreneurship 2015, Skill Loan scheme, the National Skill Development Mission & information and communication technology (ICT) scheme will further help strengthen the Indian education industry and help India achieve sustainable growth through its skilled and quality work-force.

Given the above facts, the one Company which has its roots in the Indian education industry and the clear choice stands out to be "MT Educare Limited". The Company started with the brand name "Mahesh Tutorials" for School section in Mumbai in the year 1988 under the guidance of its founder Mr. Mahesh Shetty. As the years passed, the Company started expanding into new locations and into streams such as science, commerce, CA, IIT JEE, AIPMT, CAT, CMAT, etc.In the year 2012, the Company successfully listed on BSE & NSE.  In 2012, the Company was present in 114 locations and now the Company has expanded to 161 locations as of March' 16, thereby resulting in an increase by 41 % in market presence in a period of 5 years.In March’ 16, the Company has tied up with 4 more colleges, taking the tally to 22 college tie-ups.

Why MT Educare Limited?

  Strong Brand Image: The Company has a market presence of more than 30 years and an excellent track record of delivering academic excellence in the coaching industry.

Organized and Diversified Player: The Company has the following revenue verticals as given below:
Revenue vertical
Revenue(Rs. in Lakhs)
No. of Students Serviced
FY 2016
FY 2015
Growth (in %)
% to Total (FY 2016)
FY 2016
FY 2015
Growth (in %)
% to Total (FY 2016)
School Section
8,029
9,506
-16 %
29 %
36,544
34,431
6 %
24%
Science Section
9,738
7,654
27 %
35%
24,436
22,461
9 %
16%
Commerce Section/
UVA Skill Development
5,878
4,001
47 %
21 %
40,338
25,218
60 %
26 %
Robomate+
4,109
296
1288%
15 %
52,328
1,862
2710 %
26 %
Total
27,754
21,457
 29 %

153,646
83,972
83 %


Ø  In revenue terms -> All the above verticals except for school section which form 71 % of the total revenue of FY 2016, have seen strong increase as compared to FY 2015.
Ø  In terms of students serviced -> All the above verticals have witnessed a decent increase (Overall by 83 %) as compared to FY 2015 , with commerce and skill development with 60 % growth in students and an excellent growth of the Company's new offering "Robomate".

Experienced Faculty Members: Experienced top management personals with an experience of more than 20 years of overall industry experience. Of the total human capital strength of 2,500,+ 1,300+ are dedicated and trained faculty members.

Digitalized Learning (Robomate+): The Company's offering in the India's digital education industry. As everyone knows that technology is booming in India and Education sector is no exception. The Company is also in the race to capture a sizeable market share and has executed the following initiatives as given below:

Ø  ‘Robomate+’ Mobile App launched on Android platform.
Ø  India’s first Fully-Integrated Learning Management System (LMS) rolled out in 600+ MT Classrooms.
Ø  Crossed over 1 million+ downloads in for its Robomate+ App.
Ø  The new features in the Robomate+ App like assessments and study group will result in enhancing students learning experience and academic growth substantially.

§  Update by Mr. Mahesh Shetty, Chainman & Managing Director of the Company (On 11 November' 16):
"We are happy to announce that post the launch of their new app "Robomate+" in June 2016, the Company has crossed over  1 million downloads in last than six months. Robomate+ has started to gain good traction, with increasing demand from students and Top educational institutions.  The new features in the App like assessments and study group will result in enhancing students learning experience and academic growth substantially. The Robomate+ is now available for sale on leading e-commerce portals and students can get access to high quality content and all the features on the Robomate+ platform through a unique subscription model at affordable prices."

 Financial Overview:(Rs. in Lakhs)
Particulars
Nine Months ended
Growth
Six Months ended
Growth
Year ended
Growth
31-Dec-2016
31-Dec-2015
In %
30-Sep-2016
30-Sep-2015
In %
31-Mar-2016
31-Mar-2015
In %
Revenue from Operations (A)
23,497
22,842
3 %
17,141
15,775
9 %
28,708
22,699
26 %
Total Expenses excluding finance cost (B)
21,116
19,135
10 %

14,390
13,244
9 %
24,482
18,931
29 %
Earnings Before Interest, Tax & Appropriation (EBITA) [A-B]
2,380
3,707
-36%
2,750
2,531
9 %
4,226
3,767
12 %
EBITA/Revenue (in %)
10 %
16 %

16 %
16 %

15 %
17 %

Earnings per Share (EPS)
3.72
6.88
-46%
4.83
4.91
-2%
8.12
7.47
9 %

Ø  The Company has witnessed descent Revenue & EBITA growth for the year ended March 2016 and six months ended September 2016 as compared to the previous period.
Ø  Revenue to EBITA ratio is consistant for the year ended March 2016 and six months ended September 2016.
Ø  During the quarter ended 31 December 2016, the EBITA as well as PBT have seen a significant fall mainly because the Company has made a huge spend on advertisement expenses to strengthen its brand & market position across all its existing and potential locations. Also, there has been significant increase in interest cost. The new debts taken by the Company appears to be taken for managing its working capital and content creation.

Financial position:
Particulars
As at 30 Sep 2016
As at 31 Mar 2016
As at 31 Mar 2015
Current Assets (A)
13,065
7,937
5,820
Current Liabilities (B)
15,854
          12,188
7,913
Current ratio (A/B)
0.82
0.65
0.74

Ø  The current ratio should ideally have been 1, but it’s not only below 1 but also is fluctuating over period and the Company is dependent on borrowings to manage its day to day business operations.
Ø  Of the total current assets, major portion is occupied by trade receivables and short term loans & advances, which looks as a concern as the Company is not able to turn it into productive resource (cash) in order to have an efficient current ratio.

Given the above facts & insights and taking into consideration the Company’s current market position, if the Company is able to manage its working capital efficiently and reduce its debt exposure over a period of next 12 months, this share will surely see an upward trend in the prices soon.

The share is currently at Rs 82 and has a its first support level at Rs 77 and second support level at Rs 70. If the share is able to sustain above these levels then we recommend a buy.

Thanks for joining us. Have a nice day. 

- RicherInvestor

Written by Priyesh Balani (CA, BCom)

Disclosure:
No one at RicherInvestor has any financial interest in the company.
The author is not a research analyst.

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