CMP 47multibaggerstocks.org/wp-content/uploads/2017/05/Zee-Learn-Ltd... · Index Details Zee Learn is fast emerging as a dominant player in the play school and K12 segment through

Zee Learn Ltd Not Rated

- 1 - Monday, 8th

May, 2017

This document is for private circulation, and must be read in conjunction with the disclaimer on the last page.

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Key Financials (Rs in cr)

EPS

EPS

Growth RONW ROCE P/E EV / EBITDA

(`) (%) (%) (%) (x) (x)

2016 151.3 36.0 15.1 0.5 51.79 6.23 5.64 104.1 39.3

2017 178.9 62.3 36.6 1.1 142.93 13.54 9.46 42.9 25.9

2018E 218.6 81.0 46.4 1.4 26.54 14.84 16.61 33.9 18.1

2019E 286.0 120.8 75.4 2.4 62.52 20.40 25.21 20.8 12.6

2020E 353.2 157.0 100.9 3.1 33.92 22.25 28.26 15.6 9.7

Y/E MarNet

RevenueEBITDA Adj. PAT

CMP ₹ 47

Index Details Zee Learn is fast emerging as a dominant player in the play school

and K12 segment through its Kidzee and Mount Litera Zee School

(MLZS) brands. The compelling growth dynamics of the Indian

demographics, rising affluence and a strong ethos of good quality

education are expected to drive growth for education in the country.

Being predominantly a franchisee based business, we believe that

Zee Learn can maintain its traction in establishing a pan India

franchisee over the next decade. To support its brand growth, the

company has put in place strong pedagogy of ‘Illume and Octave’

and follows a policy of 0% tolerance in its implementation.

On the back of the above, we expect revenues to grow at a CAGR of

23.6% to Rs 353.5 crore by FY20. EBITDA and PAT too are expected

to grow at a CAGR of 44.5% to Rs 157 crore and 60.8% to Rs 100.9

crore, respectively, by FY20. Return ratios ROE and ROCE too are

expected to grow up to 22.3% and 28.3%, respectively. ROIC should

also exhibit strong traction. We have valued the business of Zee

Learn by DCF method with a target price of Rs. 78. However we have

not rated the stock given that we would like to see more follow

through on continued performance and execution.

We initiate coverage on Zee Learn with no rating but have valued it

with a DCF based valuation. Our optimism stems from the fact that-

Company is expected to operate 2,470 franchisee preschools

and 147 K12 franchisee schools apart from its 6 owned

preschools and K12 schools by FY20.

Students in the preschool segment are expected to grow at a

CAGR of 25.8% to 2,39,855 students while in K12 segment at

a CAGR of 33.7% to 1,16,340 students by FY20.

Sensex 29,858

Nifty 9,285

Industry Education

Scrip Details

MktCap (` cr) 1,485.8

BVPS (`) 7.76

O/s Shares (Cr) 32.26

AvVol 231818

52 Week H/L 26.5/51.3

Div Yield (%) 0.0

FVPS (`) 1.0

Shareholding Pattern

Shareholders %

Promoters 67.3

Public 32.7

Total 100.0

Zee Learn vs. Sensex

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Sensex Zee Learn

- 2 - Monday, 8th

May, 2017


The company charges advance annual payments, which

ensure regularity of cash inflows.

Revenues for the preschool segment are expected to grow at

a CAGR of 19.6% to Rs 218.5 crore from the K12 segment at a

CAGR of 34.3% to Rs 110.4 crore by FY20.

The company has transferred Rs. 125 crore in debts out of

the entire Rs 386.6 in FY17 to the trust which runs its owned

school leading to a huge reduction in debt and interest costs.

This will also result in an improvement in overall margins.

With the company having operations being stabilized and no

big capital expenditure to be incurred over the next 4-5 years,

strong cash flow generation of 30.2% CAGR to Rs 136.9 crore

by FY20 is on the cards.

- 3 - Monday, 8th

May, 2017


Company Background

Zee Learn Ltd is India’s leading company in the education segment with the

fastest growing chain of K-12 schools – Mount Litera Zee School and Asia’s No

1 pre-school network – Kidzee. They are pioneers in the education stream and

have standardized pre-schooling under Zee Learn’s proprietary pedagogy. The

company also runs Zee Institute of Media Arts (ZIMA), a TV and Film training

institute and Zee Institute of Creative Art (ZICA), which is the nation’s first full-

fledged Classical and Digital Animation Training Academy spread over 15 cities

across the country.

Business Verticals of Zee Learn

Source: Zee Learn, Ventura Research

- 4 - Monday, 8th

May, 2017


Key Investment Highlights

Franchisee based business model to sustain high growth in the long term

Zee Learn’s primarily franchisee-based business model augurs well for high

revenue growth over the long term. Its brisk run rate of adding 250-300

preschools and 12-14 new K-12 schools to the existing operation network of

1,750 preschools and 105 K-12 schools suggests strong student enrollment.

We expect student enrollment to grow at a CAGR of 25.8% and 33.7% for

preschools and K-12, respectively.

On the back of the same, we expect revenues to grow at a CAGR of 23.6% over

FY16-20 to Rs 353.2 crore from Rs 151.3 crore reported in FY16. EBIDTA and

PAT margins are expected to grow at a CAGR of 44.5% to Rs.157 crore and

60.8% to Rs. 100.9 crore over the same period, respectively.

Our optimism stems from the following-

India’s compelling demographic profile augurs well for preschool and K-12

outlook

India’s demographic profile is very attractive with almost 50% of the population

being below the age of 25 years. This majority population of youth drives the

demand for education.

Revenue streams of Zee Learn

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400

FY 13 FY 14 FY 15 FY 16 FY17 FY18 E FY19 E FY20 E

Educational Goods and Equipments Course Fees/Royalty

Franchisee Fees Lease Rentals

Television Content & Other Income

In Rs. Cr


- 5 - Monday, 8th

May, 2017


Demand dynamics for play group and K12 Segment augurs well for Zee

Learn

The burgeoning middle class with their increasing income and the premium on

quality branded education are the main factors fuelling demand for branded

preschools in tier II and III cities. The demand for preschools is expected to

grow at a CAGR of 26% (as per the Indian education investment report 2013 of

Franchise India). Kidzee which is clearly the market leader is expected to be the

biggest beneficiary.

As per Technopak, of the $52 billion K-12 segment, 0.4 million (of the total 1.5

million) schools are run by the private sector. This pie is expected to grow at a

CAGR of 16% by FY20. Today MLZS, with 105 schools is next only to Delhi

Public School, with 197 schools. We expect MLZS to continue to remain one of

the dominant players, while closing the gap on the market leader.

Popularity of CBSE curriculum to drive demand for K12 segment

More and more parents are interested in educating their children in CBSE

affiliated schools. CBSE has emerged as a popular curriculum and schools are

rapidly adopting the same given that-

CBSE affiliated schools groom the child in learning the style which is used in

competitive entrance exams.

The new innovations brought about by CBSE, specially the schemes

motivated to reduce stress on students, is alluring both to parents and children.

Some of the most attractive CBSE innovations include the Continuous and

comprehensive evaluation system, the optional Class 10th external board

exam, providing the formulae within exam papers, open text based assessment

etc. These have found favour with both students and parents alike.

MLZS K12 schools follow the CBSE curriculum and this should find easy

acceptability among prospective parents.

50% of the population is below 25 years

0%

20%

40%

60%

Below 25 25-40 40-60 above 60

India Japan China United States of America


- 6 - Monday, 8th

May, 2017


IB (International Board) surge in India

Elite private schools across India - be it under the ICSE Board or Central Board

of Secondary Education - are losing students in large numbers to international

schools and exams like the IGCSE and IB. Across India, the trend has picked up

significantly of late. Pedagogical techniques around the globe are witnessing a

paradigm shift. The demands on the students for admission into top colleges

and universities, both within India and abroad, require them to be able to think

critically, think conceptually and develop research and analytical skills.

Many parents feel that the international system prepares their children better for

an increasingly globalised world. Schools with affiliation to international boards

have sprung up across the metros. The ethos of a good education is deeply

rooted in the Indian culture and parents with increasing affluence are seeking

international schools.

Zee Learn has one school offering IB curriculum in the upmarket BKC in

Mumbai.

CBSE schools have shown huge % increase

4843

6293

13898

15845

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2000

4000

6000

8000

10000

12000

14000

16000

18000

1996-97 2001-02 2012-13 2016-17

No of CBSE affiliated schools

In nos.


Number of private CBSE schools has elevated

3483

10290

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2000

4000

6000

8000

10000

12000

2001-02 2012-13

No of private CBSE schools

In nos.


- 7 - Monday, 8th

May, 2017


Aggressive roll out of Kidzee and Mount Litera schools pan India

Zee typically opens schools in two segments, on a franchisee model pan India.

Thereby there is no constraint on growth due to capital. As smart cities are

created and cities expand, the demand for branded and professional education

is only expected to increase. We expect Zee Learn to add Kidzee centres and

Mount Litera schools at an aggressive pace, going forward.

We expect Kidzee to reach 2,470 preschools and MLZS to open 147 schools

pan-India.

Preschools signed and opened up

325

388

509

413

327

400 410 420

244291

382

310

235 255 255 260

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Number of centers signed up Number of centers opened

Total centres (RHS)

In nos.


K-12 Schools signed and opened up

30 31

26

14

2220 21 22

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14 14 14 14 14

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Number of schools signed up Number of schools opened up

Total Schools (RHS)

In nos.


- 8 - Monday, 8th

May, 2017


Zee has overtaken its peers to truly emerge as a pan India leader in the

preschool segment and second to the leader in the K-12 segment.

Student intake to remain robust for a good decade

The capacity of a Kidzee centre is typically 125-150 students in a single shift

(180 in double shifts) while that of a Mount Litera School is around 1800. The

typical capacity utilization of a centre and Mount Litera School is shown below.

Typically, it takes 5 years for a Kidzee centre to achieve full capacity utilization.

The management has a strong code of compliance to be followed. Any centre

found violating these is put on a warning. Failure to improve and adhere to the

code of conduct would mean cancellation of their franchisee centre. This strict

Preschool attains 100% capacity utilization in year 5

30

55

75

95

125

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Year 1 Year 2 Year 3 Year 4 Year 5

Capacity utilization

In nos.


K-12 School attains 100% capacity utilization in year 10

125275

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Capacity utilization

In nos.


Zee Learn emerges as market leader

1700

350

8801000

300 270

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1400

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2000

Kidzee Tree House Euro Kids Bachpan Shemrock Millenium

No of preschools

In nos.


Zee Learn is second to market leader

103

210

47

10

0

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100

150

200

250

MLZS Delhi Public School Educomp School Euro School

No of schools

In nos.


- 9 - Monday, 8th

May, 2017


adherence to the code of conduct encourages maintaining quality of education,

which in turn has a positive impact on the brand which results in building in

strong referrals that enhances student intake.

Subtle marketing activities help build brand and awareness

The franchisee is encouraged to take up awareness and brand building

exercises by organizing health camps in gated communities in its catchment

areas. Additionally, the uniqueness of its pedagogy is also highlighted and this

helps build repute of a quality education.

Zee Learn boasts of a well researched pedagogy developed in-house

Its pedagogy in the preschool segment- Interactive ILLUME is what sets Kidzee

a class apart from other pre-school chains. It is an approach that helps parents

and teachers spot the unique potential in each child and help them realize it.

This was instituted by Kidzee after conducting an action research carried out

across 20,000 parents, 2000 teachers and 1,30,000 children.

It lays down diverse pathways before a child. With keen observation, a note is

made of the preferred learning style of each child. Once this is concluded,

activities are built around his/her preferred learning style. This approach ensures

that no pressure is enforced on the child and hence they grow at their own pace.

The child learns HOW to think rather than WHAT to think.

On the other hand, Litera Octave (pedagogy in K-12 segment) is the core belief

of every Zee School, which integrates the various pillars that impact the children

during their learning and development in school. It consists of the following

parts- Litera parents, Litera enrichment, Litera life skills, Litera network, Litera

Infra, Litera content, Litera teacher and Litera assessment.

- 10 - Monday, 8th

May, 2017


Over the period FY16-20, we expect the student intake to grow at a CAGR

of 25.8% and 33.7 % to 2,39,855 and 1,16,340 for Kidzee and Mount Litera,

respectively.

Each Mount Litera school has a capacity of 1800 students and hence achieving

optimal utilization takes much longer than a Kidzee centre. While the factors that

attract students to the Mount Litera schools is no different from those above, the

increase in the uptake typically gains traction when a large portion of the class X

students score greater than 80% marks.

Preschool student intake to grow robustly

70

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115

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No of students in preschools Weighted avg students in each school

In nos.


K12 student intake to flatten out after gaining 100% capacity

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FY 1

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No of students in preschools Weighted avg students in each school

In nos.


- 11 - Monday, 8th

May, 2017


Strong mix of recurring payments collected in advance from franchises augurs

well for revenue growth. The company collects revenue in the form of royalty as

well as for the child kit that it provides to respective franchisee.

However, revenue from own schools flow slightly differently-

Zee Learn owns 6 schools (5 CBSE and 1 IB). While the assets are owned by

Zee Learn, the schools are run by an educational trust (as required by law). In

turn Zee Learn earns a management fee from these schools.

We expect the owned schools to contribute to revenues from a later stage as all

the schools are new, none of them have reached breakeven.

.

Mount Litera International, being the only IB board school (which charges

premium fee) in the portfolio of Mount Litera schools, has already achieved

breakeven. However, the management has guided that the revenue flow is not

expected before FY20 for the same.

The company has been receiving healthy revenues from its 6 preschools each

year, which run on a COCO (company owned company operated) model.

On the back of the above we expect consolidated revenues to grow at a CAGR

of 19.6% to Rs.218.5 crore by FY20 driven by growth in revenue from Kidzee

and a 34.3% CAGR to Rs.110.4 crore for Mount Litera.

Owned school of the company

Bhatinda 2012-13

Nagpur 2013-14

Patiala 2013-14

Karnal 2013-14

Goa 2012-13

Mumbai 2014-15

Spread across 7.8 acres - appx.

1,25,000 sq.ft. built up

Land taken on long term lease







Spread across 5 acres appx.


Own Land

Spread across 1.45 acres –

appx. 274,000 Sq ft. built up


1,800

1,800

1,800

1,800

1,376

School LocationPeak student

capacity

1,800

Inception year Area

Spread across 8 acres - appx. 1,33,000

sq.ft. built up- Land taken on long term

lease


- 12 - Monday, 8th

May, 2017


Franchisee model ensures non-linearity in earnings as operating leverage

kicks in

The franchisee model ensures non-linearity to the earnings as the business

scales. We believe the education business has reached a size and scale from

which recovery of costs has already taken place and we should see a sharp

traction in EBITDA. We do not expect a significant increase in costs as the

existing set up is sufficient to cater to growth going forward. Besides annual

wage inflation, the uptick in costs would be only from the addition of managers

to handle the newly opened Kidzee and Mount Litera schools.

Lease rentals provide steady cash flows

The company receives regular income in the form of lease rentals from its 6

owned schools situated in BKC (Mumbai), Bhatinda, Goa, Karnal, Patiala and

Nagpur. These school properties are owned by its subsidiary Digital Ventures

Private Limited, which provides the same to a trust, who in turn pay them lease

rentals.

ZICA and ZIMA to remain a non starter

ZIMA (Zee Institute of Media Arts) Digital Academy for film making is the latest

media education hub and a new talent hot spot for Bollywood. It offers courses

in the field of Film Making, Direction, Acting, Voicing and TV Presentation,

Screenwriting, Cinematography, Sound Engineering, Editing etc.

ZICA (Zee Institute of Creative Art) is the nation's first full-fledged Classical and

Digital Animation Training Academy that trains in classical 2D and modern 3D

animation. It has state-of-the-art infrastructure covering the stages of

visualization, pre-production, production and post-production. It has over 30

centres in more than 15 major cities including Mumbai, Delhi, Bangalore,

Hyderabad, Kolkata, Pune, Lucknow, Chandigarh, Bhubaneshwar, Ahmedabad.

Both have been started as a composite service of education and entertainment

as a part of extension to the ZEE group. The company is not keen on expanding

the same and they contribute a meager proportion of share in the overall

revenues, which is further expected to fall, going ahead.

- 13 - Monday, 8th

May, 2017


Profitability set to improve

We expect EBITDA to grow at a CAGR of 44.5% to Rs.157 crore by FY20.

Margins should also see a strong uptick, rising by a whopping 2064 bps to

44.4%.

Since the number of owned schools is not expected to increase significantly, the

capital employed should come down. The transfer of debt of Rs. 125 crore to the

trust will lead to a sharp fall in debt in the current year (FY 17-18).

EBITDA sees huge upsurge in the coming years

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EBITDA EBITDA Margin

In Rs. Cr In %


Margins have been improving with each quarter

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EBITDA EBITDA Margin

In Rs. Cr


- 14 - Monday, 8th

May, 2017


Owing to the above, we expect PAT to grow at a CAGR of 60.8% to Rs. 100.9

crore by FY20, while PAT margins should rise sharply by 1860 bps to 28.6%.

Debt to equity is on a decline as well as interest as a % of sales

0%

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PAT shows a strong uptrend

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PAT PAT Margin

In %In Rs. Cr


- 15 - Monday, 8th

May, 2017


Cash flows to grow significantly

Strong cash flow generation should lead to re-rating of the stock as cashflow

generation outstrips investment needs.

Operating Cash flow shows a strong uptrend

-20

0

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140

160


In Rs. Cr


- 16 - Monday, 8th

May, 2017


Financial Performance

In Q4FY17, Zee Learn reported a healthy 19.7% growth in topline to Rs 60.1

crore from 50.2 crore reported in the same quarter of the previous year. The

EBIDTA margin decreased 190 bps to 20.8% from 22.7%, mainly on account of

rise in goods purchased. PAT stood at 14.7 crore increasing 88.5% YoY on

account of strong operating performance.

During FY17, Zee Learn’s net sales stood at 178.9 crore registering a growth of

18.2% YoY. EBIDTA margin increased 1104 bps YoY to 34.8%. PAT increased

by 143% YoY and stood at 36.6 crore.

Financial Performance (Rs in crore)

Description Q4FY17 Q4FY16 FY17 FY16

Profit & Loss Statement

Net Sales 60.1 50.2 178.9 151.3

Growth(%) 19.7% 18.2%

Total Expenditure 47.6 38.8 116.6 115.3

% of sales 79.2% 77.3% 65.2% 76.2%

EBDITA 12.5 11.4 62.3 36.0

EBDITA Margin % 20.8% 22.7% 34.8% 23.8%

Other Income 2.6 1.5 2.0 9.2

PBDIT 15.1 12.9 64.4 45.2

Depreciation 0.4 1.4 9.8 10.2

Interest 3.6 3.8 19.0 20.0

Exceptional items 0.0 0.0 0.0 0.0

PBT 11.1 7.8 35.6 15.1

Margin % 18.4% 15.4% 19.9% 10.0%

Tax Provisions -3.6 0.0 -1.1 0.0

Reported PAT 14.7 7.8 36.6 15.1

Minority Interest 0.0 0.0 0.0 0.0

Share of Associate 0.0 0.0 0.0 0.0

PAT 14.7 7.8 36.6 15.1

Margin % 24.4% 15.4% 20.5% 10.0%


- 17 - Monday, 8th

May, 2017


Financial Outlook

The revenue growth trajectory is expected to continue, going forward on the

back of strong growth in the preschool franchisee business. We expect overall

revenues to grow at a CAGR of 23.6% over FY16-20 to Rs 353.3 crore from Rs

151.3 crore reported in FY16. Further, the EBIDTA and PAT margins are

expected to surge to 44.4% and 28.6% in FY20 from 23.8% and 10%

respectively.

Return ratios ROCE and ROE are also expected to get bumped up by 2262 bps

and 1602 bps to 28.3% and 22.3% respectively by FY20

Revenues, EBIDTA and PAT margins

-30%

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Educational Goods and Equipments Course Fees/Royalty

Franchisee Fees Lease Rentals

Television Content & Other Income EBITDA Margin

PAT Margin

In Rs. Cr


Strong financials to boost ROCE and ROE

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ROE ROCE

In %


Debtors and Creditors Days

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Creditor Days Debtor Days

In days


- 18 - Monday, 8th

May, 2017


Key Risk and Threats

Schooling business requires front-loaded capex and provides back ended

returns (2-3 years in the case of a preschool and 8-9 years in case of a K-12),

which presents a substantial resistance for ramp up in school signups.

Preschool segment presents a huge market but is dominated by unorganized

players, which cover as much as 70% of the total market.

A typical K-12 school requires 2-3 years to open, post its initial agreement and is

highly regulated, requiring lots of licenses and agreements in place.

There is still lack of awareness about good quality education especially in Tier 3

towns and also unavailability of quality teachers.

Pricing cap like those proposed in Gujarat could restrict pricing freedom. With

the GOI also voicing similar thoughts pricing would be regulated leading to

dampener to value growth and margin accretion. However we do not expect any

drastic measures as education and we evince the formation of a “regulator” who

would balance the interests of schools and parents/students.

Price bracket of school fees proposed in Gujarat

15000

2500027000

0

5000

10000

15000

20000

25000

30000

Primary section Primary section 11th & 12th standard

Price Cap

In Rs.


- 19 - Monday, 8th

May, 2017


Valuation

We initiate coverage on Zee Learn Ltd without any rating. However, we have

valued it with a DCF derived price objective of Rs 78 representing a potential

upside of 64%.

The proof of the concept has been established and the company is at an

inflexion point of rapid scalability and cash flow generation.

Key DCF Assumptions

Projected Years FY17-FY26

Risk Free rate 7.5%

Risk premium 4.0%

Beta 0.9

Cost of Equity 10.8%

Cost of Debt (after tax) 7.5%

Target D/E 0.1

WACC 10.3%

Terminal Growth Rate 6.0%


DCF Table (Rs in crore)

Particulars Mar-16 Mar-17 Mar-18 Mar-19 Mar-20 Mar-21 Mar-22 Mar-23 Mar-24 Mar-25 Mar-26

EBIT(1-T) 35.06 36.56 52.93 79.40 104.96 120.31 142.82 161.52 186.10 198.60 222.35

Depreciation 10.19 9.80 12.82 14.16 15.50 17.18 18.85 20.53 22.20 23.88 26.69

Increase in WC 13.17 10.70 15.07 6.02 14.46 13.73 6.72 9.59 5.90 4.84 (1.06)

Increase in Capex (42.67) (32.25) (28.77) (28.94) (32.88) (38.28) (38.70) (39.13) (39.57) (40.04) (40.52)

FCFF 15.75 24.81 52.05 70.64 102.04 112.93 129.69 152.51 174.62 187.28 207.47

Net Debt (42.21) - - - - - - - - - -

Year 0 1 2 3 4 5 6 7 8 9 10

FCFF discounted at WACC 22.49 42.75 52.58 68.82 69.02 71.84 76.55 79.43 77.21 77.51

Terminal Value (at PV) 1,908.21

Enterprise Value 2,546.40

Debt Value (net) 35.74

Equity Value 2,510.66

No. of shares (in cr) 32.26

Value per share 77.83

CMP 47.55

Upside 63.7%


- 20 - Monday, 8th

May, 2017


We are positive on the company given that:

There is high visibility of long term earnings and sustainable free cash flow

generation. We believe, DCF best captures the valuation potential.

Zee Learn compares favorably with peers in education

0%

5%

10%

15%

20%

25%

30%

0.00 0.50 1.00 1.50 2.00

PEG Ratio FY18E

Navneet Education Ltd

MTEducare LtdZee Learn Ltd

Aptech Ltd RO

E %

FY

18E

NIIT Ltd

Source: Zee Learn, Bloomberg, Ventura Research

ROIC and Free cash flow to equity of Zee Learn

-7%

-2%

3%

8%

13%

18%

-100

-50

0

50

100

150

200

250

FY 13 FY 14 FY 15 FY 16 FY17 FY18 EFY19 EFY20 EFY21 EFY22 EFY23 EFY24 EFY25 EFY26 E

FCFE ROIC


- 21 - Monday, 8th

May, 2017


Zee Learn PB trend

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20.00

30.00

40.00

50.00

60.00

Ap

r 1

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Ma

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5

Jun

15

Jul

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Au

g 1

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Se

p 1

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Oct 1

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No

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c 1

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Jan

16

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Jun

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17

Fe

b 1

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7

Ap

r 1

7

CMP 3.05x 3.65x 4.25x 4.85x 5.45x


Zee Learn PE trend

0

20

40

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120

Apr 15 Jun 15 Aug 15 Oct 15 Dec 15 Feb 16 Apr 16 Jun 16 Aug 16 Oct 16 Dec 16 Feb 17 Apr 17

CMP 10X 31X 52X 73X 94X


Zee Learn EV/EBITDA trend

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Ap

r 1

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Jun

15

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15

Au

g 1

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b 1

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EV 17.52x 22.76x 28x 33.24x 38.48x


- 22 - Monday, 8th

May, 2017


Peer Comparison (Rs in crore)

Y/E March Net Sales EBITDA PAT

EBITDA

margin

(%)

PAT

margin

(%)

EPSEPS

growth (%)ROE (%) P/E P/BV EV/EBITDA

Zee Learn Ltd

2016 151.3 36.0 15.1 23.8 10.0 0.5 51.8 6.2 104.1 6.3 39.3

2017 178.9 62.3 36.6 34.8 20.5 1.1 142.9 13.5 42.9 5.4 25.9

2018E 218.6 81.0 46.4 37.0 21.2 1.4 26.5 14.8 33.9 4.7 18.1

2019E 286.0 120.8 75.4 42.2 26.3 2.4 62.5 20.4 20.8 3.9 12.6

2020E 353.2 157.0 100.9 44.4 28.6 3.1 33.9 22.2 15.6 3.1 9.7

Navneet

2016 948.9 176.8 103.4 18.6 10.9 4.3 -20.7 18.4 34.1 6.0 17.3

2017E 1109.5 264.2 160.7 23.8 14.5 6.7 55.1 26.7 22.0 5.2 13.5

2018E 1302.3 306.6 188.7 23.5 14.5 8.0 18.8 28.3 18.5 4.8 11.6

2019E 1481.3 351.7 215.2 23.7 14.5 9.1 14.2 27.5 16.2 4.2 10.1

NIIT

2016 1006.9 69.5 67.2 6.9 6.7 4.1 148.5 8.8 18.2 1.5 18.7

2017E 1076.0 77.8 59.4 7.2 5.5 3.6 -12.4 7.3 20.8 1.5 18.0

2018E 1202.8 124.0 115.5 10.3 9.6 7.0 96.2 13.4 10.6 1.4 11.3

2019E 1376.1 157.7 149.8 11.5 10.9 9.1 29.3 16.2 8.2 1.2 8.8

Aptech

2016 163.3 20.4 10.2 12.5 6.2 2.6 -34.9 4.5 92.8 4.1 32.5

2017E 222.5 38.2 23.1 17.2 10.4 5.8 127.1 9.2 40.9 3.8 23.7

2018E 255.9 45.6 27.6 17.8 10.8 6.9 19.5 9.9 34.2 3.4 19.9

MT Educare

2016 287.1 57.7 3.2 20.1 1.1 8.1 8.7 23.6 15.5 3.4 9.0

2017E 324.7 60.3 3.4 18.6 1.1 8.7 6.5 19.3 14.6 2.8 9.3

2018E 366.6 67.8 3.7 18.5 1.0 9.3 6.9 17.4 13.6 2.4 8.2

Source: Zee Learn, Bloomberg, Ventura Research

- 23 - Monday, 8th

May, 2017


Financials and Projections

Y/E March, Fig in ` Cr FY16 FY17 FY18E FY19E FY20E Y/E March, Fig in ` Cr FY16 FY17 FY18E FY19E FY20E

Profit & Loss Statement Per Share Data (Rs)

Net Sales 151.3 178.9 218.6 286.0 353.2 Adj. EPS 0.5 1.1 1.4 2.4 3.1

% Chg. 18% 18% 22% 31% 23% Cash EPS 0.8 1.4 1.8 2.8 3.6

Total Expenditure 115.3 116.6 137.7 165.3 196.3 DPS 0.0 0.1 0.1 0.1 0.1

% Chg. 1% 18% 20% 19% 14% Book Value 7.8 9.0 10.3 12.6 15.6

EBDITA 36.0 62.3 81.0 120.8 157.0 Capital, Liquidity, Returns Ratio

EBDITA Margin % 23.8% 34.8% 37.0% 42.2% 44.4% Debt / Equity (x) 1.5 0.8 0.3 0.2 0.2

Other Income 9.2 2.0 10.9 11.9 15.2 Current Ratio (x) 0.8 0.9 1.2 1.5 1.9

PBDIT 45.2 64.4 91.8 132.7 172.2 ROE (%) 6.2 13.5 14.8 20.4 22.2

Depreciation 10.2 9.8 12.8 14.2 15.5 ROCE (%) 5.6 9.5 16.6 25.2 28.3

Interest 20.0 19.0 9.8 6.0 6.0

Exceptional items 0.0 0.0 0.0 0.0 0.0 Valuation Ratio (x)

PBT 15.1 35.6 69.2 112.5 150.6 P/E 104.1 42.9 33.9 20.8 15.6

Tax Provisions 0.0 -1.1 22.8 37.1 49.7 P/BV 6.3 5.4 4.7 3.9 3.1

Reported PAT 15.1 36.6 46.4 75.4 100.9 EV/Sales 11.8 9.3 7.6 5.8 4.7

Minority Interest 0.0 0.0 0.0 0.0 0.0 EV/EBIDTA 39.3 25.9 18.1 12.6 9.7

Share of Associate 0.0 0.0 0.0 0.0 0.0 Efficiency Ratio (x)

PAT 15.1 36.6 46.4 75.4 100.9 Inventory (days) 26 29 30 32 33

PAT Margin (%) 10% 20% 21% 26% 29% Debtors (days) 72 102 80 76 66

Tax Rate (%) 0% -3% 33% 33% 33% Creditors (days) 22 25 26 24 23

Balance Sheet Cash Flow Statement

Share Capital 32.1 32.3 32.3 32.3 32.3 Profit Before Tax 15.1 35.6 69.2 112.5 150.6

Share warrant 0.0 0.0 0.0 0.0 0.0 Depreciation 10.2 9.8 12.8 14.2 15.5

Reserves & Surplus 218.1 258.9 301.4 372.8 469.8 Working Capital Changes 13.2 10.7 15.1 6.0 14.5

Borrowings 386.6 225.8 100.8 100.8 100.8 Others 9.3 20.1 -13.0 -31.1 -43.7

Long Term Provision 1.5 1.6 1.6 1.6 1.6 Operating Cash Flow 47.7 76.1 84.1 101.6 136.9

Other Non Current Liabilities 7.6 133.3 260.5 262.0 263.7 Capital Expenditure -42.7 -32.2 -28.8 -28.9 -32.9

Total Liabilities 645.8 651.9 696.6 769.5 868.3 Other Investment Activities 0.1 8.8 -47.6 -58.5 -99.3

Gross Block 623.9 656.1 684.9 713.8 746.7 Cash Flow from Investing -42.6 -23.4 -76.4 -87.4 -132.2

Less: Acc. Depreciation 32.2 42.0 54.8 69.0 84.5 Changes in Share Capital 1.2 0.2 0.0 0.0 0.0

Net Block 591.7 614.1 630.1 644.8 662.2 Changes in Borrowings -6.7 -43.4 -7.7 -4.6 -4.4

Non current Investments 0.0 0.0 0.0 0.0 0.0 Dividend & DDT 0.0 -3.9 -3.9 -3.9 -3.9

Deferred Tax Assets (Net) -0.1 4.3 4.4 4.5 4.6 Cash Flow from Financing -5.5 -47.1 -11.6 -8.6 -8.3

Long term Loans & Advances 31.0 27.2 28.5 31.4 34.5 Net Change in Cash -0.38 5.57 -3.95 5.59 -3.64

Net Current assets 23.2 6.3 33.6 88.8 167.0 Opening Cash Balance 11.9 11.5 17.1 13.1 18.7

Total Assets 645.8 651.9 696.6 769.5 868.3 Closing Cash Balance 11.5 17.1 13.1 18.7 15.1

- 24 - Monday, 8th

May, 2017


Disclosures and Disclaimer

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