MT Educare Equity Research

Date of Research-16-06-2016

Price-Rs. 167.00

About the Company

MT educare (“MT Educare” or the “Company) provides online and  offline tutorials to standard 6 to 12 th of CBSE and state board (Maharashtra and Gujarat) and national level entrance examinations  like MBA entrance, IIT , AIPMT and other professional courses  like Chartered accountant. The Company is currently serving 9 million students across India. MT Educare is engaged in the business of providing education support and coaching services under the brand name “Mahesh Tutorials”. MT Educare has its presence in 128 locations across 7 states and union territories of India.

Key Financial Figures

Consolidated(Rs. Cr)
ParticularsFY 2013FY 2014FY 2015FY 2016FY 2017
Total Income from Operations157.28201.80226.99287.08 301.07 
Expenses127.95159.46180.40 229.21251.97  
Earnings Before Other Income, Interest, Tax and Depreciation (Operating Profit)29.3342.3546.5957.8849.09  
Depreciation8.5912.848.9115.6119.14  
Finance Costs0.000.014.023.2813.51  
Other income4.652.397.088.5011.52  
PBT25.3931.8940.7447.4927.96  
Tax7.5711.1411.6815.3110.77  
PAT (before Minority Interest and share of Associates) 17.82 20.7629.0632.1917.19  
Profit/ (loss) attributable to Minority Interest(0.23)(0.28)(0.67)(0.16)– 
Share of profit / (loss) of Associates– 
Consolidated Profit / (Loss) for the year18.0521.0329.7332.3517.19  

Profitability Analysis

Consolidated(%)
ParticularsFY 2013FY 2014FY 2015FY 2016FY 2017
Operating Profit Margin Ratio18.6520.9920.5320.1616.31 
Net Profit Margin Ratio11.4810.4213.1011.275.71 

Operating profit margin is a measurement of the proportion of a company’s revenue that is left over after paying for production costs such as raw materials, salaries and administrative costs. Net profit margin is arrived at by deducting non operating expenses such as depreciation, finance costs and taxes out of operating profit and shows what is left for the shareholders as a percentage of net sales. Together these ratios help in understanding the cost and profit structure of the firm and analysing business inefficiencies. 

Key Balance Sheet Figures

Sources of Funds / Liabilities(Rs. Cr)
ParticularsFY 2012FY 2013FY 2014FY 2015FY 2016
Share Capital35.17  39.5539.78  39.79  39.82 
Share application money– 0.02– 
Reserves & Surplus21.9561.6072.1785.94  108.75 
Net worth (shareholders funds)57.12101.16111.96125.73 148.57 
Minority Interest0.06(0.16)(0.67)0.40– 
Long term borrowings– – 
Current liabilities66.57  67.7567.41  78.04121.88 
Other long term liabilities and provisions6.068.974.198.637.29 
Deferred Tax Liabilities– 0.01– – – 
Total Liabilities129.81177.73182.89 212.81277.74 

 

Application of Funds / Assets(Rs. Cr)
ParticularsFY 2012FY 2013FY 2014FY 2015FY 2016
Fixed Assets47.71  79.37107.8070.7267.46 
Noncurrent Investments3.302.050.780.780.78 
Current Asset60.7961.9149.9957.1179.37 
Long term advances and other noncurrent assets13.9230.2919.6677.02105.51 
Goodwill on consolidation (net)4.094.104.667.1916.28 
Total Asset129.81177.73182.89212.81 277.74 

Efficiency Analysis

 (%)
ParticularsFY 2012FY 2013FY 2014FY 2015FY 2016
ROCE40.4029.0438.0536.9438.96 
ROE23.1617.8418.7823.6521.67 

Return on Capital Employed (ROCE) measures a company’s profitability from its overall operations by calculating the return generated on the total capital invested in the business (i.e. equity + debt). Return on Equity (ROE) or Return on Net Worth (RONW) measures the amount of profit which the company generates on money invested by the equity shareholders. In short, ROE draws attention to the return generated by the shareholders on their investment in the business. Together these ratios can be used in comparing the profitability of the company with other companies in the same industry. 

Valuation Analysis

Consolidated
ParticularsFY 2013FY 2014FY 2015FY 2016FY 2017
Total Income from Operations (Rs. Cr.)157.28201.80226.99287.08301.07 
Growth (%)20.46 % 28.31 %12.48 %26.47 %4.87 % 
PAT (Rs. Cr.)18.0521.0329.7332.3517.19  
Growth (%)36.43 16.5041.378.81(46.85 %) 
Earning Per Share – Basic (Rs. )4.585.297.478.12 4.32 
Earning Per Share – Diluted (Rs. )4.555.297.47      8.124.32 
Price to Earnings17.6816.4213.8620.3614.75 

Dividend History

The Company has maintained an average dividend yield of 1.96 % over the last 5 financial years.

Liquidity and Credit Analysis

Current Ratio

Higher current ratio implies healthier short term liquidity comfort level. A current ratio below 1 indicates that the company may not be able to meet its obligations in the short run. However, it is not always a matter of worry if this ratio temporarily falls below 1 as many times companies squeeze out short term cash sources to achieve a capital intensive plan with a longer term outlook. MT Educare’s average current ratio over the last 4 financial years has been 0.83 times which indicates that the company is comfortably placed to pay for its short term obligations.

Long term Debt to Equity Ratio

Companies operating with high long term debt to equity on their balance sheets are vulnerable to economic cycles. In times of slowdown in economy, companies with high levels of debt find it increasingly difficult to service the interest on their borrowings as profit margins decline. We believe that long term debt to equity ratio higher than 0.6 – 0.8 could affect the business of a company and its results of operations.

MT Educare’s average long term debt equity ratio over the 4 financial years has been 0.00 times which indicates that the company operates with zero level of debt and accordingly is placed well to withstand economic slowdowns.

Interest Coverage ratio

Interest coverage ratio indicates the comfort with which the company may be able to service the interest expense (i.e. finance charges) on its outstanding debt. Higher interest coverage ratio indicates that the company can easily meet the interest expense pertaining to its debt obligations. In our view, interest coverage ratio of below 1.5 should raise doubts about the company’s ability to meet the expenses on its borrowings. Interest coverage ratio below 1 indicates that the company is just not generating enough to service its debt obligations.

Since the Company operates with zero level of debt, this ratio is not applicable.

Ownership pattern

In its latest stock exchange filing dated 31 March 2016, MT Educare reported a promoter holding of 42.78 %. Large promoter holding indicates conviction and sincerity of the promoters. We believe that a greater than 35 % promoter holding offers safety to the retail investors.

At the same time, institutional holding in the Company stood at 22.35 % (FII+DII). Large institutional holding indicates the confidence of seasoned investors. At the same time, it can also lead to high volatility in the stock price as institutions buy and sell larger stakes than retail participants.


Researched by: Puneet Singh