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MPS – Multibagger Stock For the Month of December 2018

Price – Rs. 503

View – Buy

About the Company

MPS Limited (“MPS” or the “Company”) provides content publishing solutions, media solutions, translation services and technology software for content creation and development.

MPS is now a global partner to the world’s leading enterprises, learning companies, publishers, libraries, and content aggregators.

The Company’s business is divided into Content Solutions and Platform Solutions.

[1] Content Solutions includes creating and developing content for print and digital delivery.

[2] Platform Solutions involves developing and implementing software and technology services programs.

Nearly 57% of the revenue is derived from the U.S.

Business Segments

Content Solutions (82%)

Platform Solutions (18%)

·   Content Authoring and Development

·   Content Production

·   Content Transformation

·   Fulfillment and Customer Support

·   DigiCore – smart, cloud-based digital publishing platform

·   THINK (recent acquisition) – Unified Digital Ecosystem for content delivery, order management, and usage analytics

·   Mag+ (recent acquisition) – mobile publishing platform

·   ScholarStor (re-launched)

·   Technology Services

Clients

MPS

Attractive Acquisitions

Element

EPS

TSI Evolve

MagPlus

Think Subscription

Tata Interactive  Systems

Date

May’13

Oct’14

Mar’15

Jul’16

Feb-17

April’18

Rationale

1. Enhance content development capabilities in pre-K and K-12 markets

2. Increase footprint in North America

1. Increase service portfolio in academic/ higher education publishing market

2. Add a new large client in North America

TSI Evolve acquisition brought in new capabilities in reading discipline, designing and compositions for MPS enhancing its service portfolio.

Platform acquisition

Small acquisition that would give access to core technologies

Award winning enterprise learning business with 70 Fortune customers

Financial Position

Particulars

FY14

FY15

FY16

FY17

FY18

Revenue (In Rs. Cr.)

197.28

223.87

257.21

288.70

267.03

Growth

13.48%

14.89%

12.24%

-7.51%

EBITDA (In Rs. Cr.)

62.95

80.36

91.00

93.29

87.06

EBITDA Margin

31.91%

35.90%

35.38%

32.31%

32.60%

EBIT (In Rs. Cr.)

57.66

74.91

86.88

87.41

79.01

EBIT Margin

29.23%

33.46%

33.78%

30.28%

29.59%

PBT (In Rs. Cr.)

63.95

93.10

105.14

102.55

101.86

PAT (In Rs. Cr.)

42.14

61.44

71.24

70.42

70.21

PAT Margin

21.36%

27.44%

27.70%

24.39%

26.29%

EPS (In Rs.)

25.05

33.00

38.27

37.83

37.71

EPS Growth Rate

32%

16%

-1%

-0.3%

Historic P/E (Closing Price of 31st March)

14.52

28.63

17.27

18.21

13.14

CURRENT P/E (based on price of 27th November – Rs. 503)

14.05

D/E

0.04

0.00

0.00

0.00

0.00

Interest Coverage

NA

ROCE

60.45%

29.25%

31.09%

25.13%

18.87%

ROE

69.72%

36.35%

37.63%

29.48%

24.33%

Quarterly Results

Quarterly Results

Q2 FY 2018

Q3 FY 2018

Q4 FY 2018

Q1 FY 2019

Q2 FY 2019

Revenue

68.67

67.88

63.58

72.13

100.59

EBITDA

23.69

23.94

18.93

19.28

25.81

EBITDA Margin

34.50%

35.27%

29.77%

26.73%

25.66%

PAT

17.04

17.56

15.16

15.28

18.67

PAT Margin

24.81%

25.87%

23.84%

21.18%

18.56%

EPS

9.15

9.43

8.14

8.21

10.02

Peers

MPS Peers

Recent Update

On 25th October, 2018, the Company’s board approved the amalgamation of ADI BPO Services limited (post demerger of its Infrastructure Management Business Undertaking into ADI Media Private limited] into MPS limited.

  • Please note that MPS Limited is the subsidiary of ADI BPO Services Limited, wherein ADI BPO Services Limited holds 67.77% shares in MPS Limited.

Large Acquisition Brings Scale and Diverse Capability

MPS has always focused to explore sizeable acquisition with a strong brand but inefficient operations. In 2018, the Company acquired Tata Interactive Systems (TIS), e-learning services provider to corporate, publishers and education institutions for cash consideration of Rs. 800 million. For MPS, this TIS acquisition represents a unique opportunity to acquire a scale business with strong prospects, global clientele and robust offerings.

The management expects that apart from adding strong inorganic revenue run-rate, these acquisitions would also improve overall growth prospects for MPS given the growth opportunity in the corporate learning business.

Booming E-Learning Sector In India

As per a Google-KPMG report, online education in India will see approximately 8x growth in the next five years. This will have a significant impact on the edtech market that has a potential to touch $1.96 billion by 2021 from where it stands now i.e. $247 million. The rising startup brigade in India’s online learning ecosystem include names such as BYJU’S, Unacademy, UCLID, Avagmah, Embibe, iProf, Simplilearn, Meritnation, Toppr, NeoStencil and Englishleap, among others. With the recent acquisition of Tata Interactive Systems, MPS has laid a huge bet on enterprise learning market.

Robust Balance Sheet Position – ­­the Company operates with zero debt.

Strong Clientele – Customers include global players like Macmillan, Cengage Learning, McGraw – Hill, Elsevier and Wolters – Kluwer.

The Company’s robust balance sheet metrics, focus to capture larger inorganic opportunity may lead to better revenue and growth momentum. Although, lower trading volume is a concern for investors.

About the Author

Rajat Sharma pictureRajat Sharma is a well known stock market analyst and commentator. He has covered Indian markets for over a decade and is regarded for consistently identifying early stage investment opportunities. Attorney by qualification, Rajat has done extensive work for improving corporate governance and disclosure standards.