CORE Education & Technologies Ltd Q4 FY12 Detailed Reportim.sify.com/.../14998310_coreeducationtechnologies.pdf · Rolta India 71.55 11543.10 22.15 3.23 0.50 35.00 Tata Elxi. 201.35

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SYNOPSIS

CORE Edu. & Tech. Ltd. provides

exhaustive range of products and

solutions spanning across all stages

of education - K12, higher education

and vocational training courses.

During the quarter ended, the robust

growth of Net sales is increased by

61.89% to Rs. 4818.90 million.

CORE Education & Technologies Ltd

has recommended dividend for Rs.

0.60 per Equity Share of Rs. 2/-

each for 2011-2012.

CORE has bagged contract from

Gujarat Govt. to implement Computer

Aided Learning (CAL) in 3236 Primary

Schools for Rs. 124 crores.

Net Sales and PAT of the company

are expected to grow at a CAGR of

27% and 27% over 2011 to 2014E

respectively.

Years Net sales EBITDA Net Profit EPS P/E

FY 12 16378.57 6542.00 3230.91 28.73 10.37

FY 13E 19654.28 7782.73 3915.29 34.81 8.56

FY 14E 22602.43 8946.72 4579.03 40.71 7.32

Stock Data:

Sector: IT

Face Value Rs. 2.00

52 wk. High/Low (Rs.) 324.00/245.20

Volume (2 wk. Avg.) 20228.00

BSE Code 512199

Market Cap (Rs in mn) 33516.06

Share Holding Pattern

1 Year Comparative Graph

CORE Edu. & Tech BSE SENSEX

C.M.P: Rs. 298.00 Target Price: Rs. 335.00 Date: May 9th 2012 BUY

CORE Education & Technologies Ltd Result Update: Q4 FY12

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Peer Group Comparison

Name of the company CMP(Rs.) Market Cap (Rs. mn.) EPS(Rs.) P/E(x) P/Bv(x) Dividend (%)

CORE Edu. & Tech. Ltd 298.00 33516.06 28.73 10.37 1.87 30.00

Polaris Soft. 128.55 15354.30 15.36 8.37 1.66 90.00

Rolta India 71.55 11543.10 22.15 3.23 0.50 35.00

Tata Elxi. 201.35 6269.70 10.90 18.47 3.47 70.00

Investment Highlights

Q4 FY12 Results Update

CORE Education & Technologies Ltd. has reported net profit of Rs 729.29 million

for the quarter ended on March 31, 2012 as against Rs. 702.77million in the same

quarter last year, an increase of 12.74%. It has reported net sales of Rs 4818.90

million for the quarter ended on March 31, 2012 as against Rs.2976.62 million in

the same quarter last year, a rise of 61.89%. Total income grew by 69.81% to Rs.

5098.58 million from Rs. 3002.54 million in the same quarter last year. During the

quarter, it reported earnings of Rs 7.04 a share.

Quarterly Results - Consolidated (Rs in mn)

As At Mar-12 Mar-11 %change

Net sales 4818.90 2976.62 61.89

PAT 729.29 702.77 12.74

Basic EPS 7.04 6.44 9.41

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� Net Sales & PAT growth

During the quarter, Net sales rose by 61.89% to Rs. 4818.90 million from Rs.2976.62

in the same the quarter last year and the Total Profit for quarter ended March 2012

was Rs.792.29 million grew by 12.74% from Rs.702.77 million compared to same

quarter last year.

� EPS

Due to increase in equity capital the basic EPS of the company stood at Rs. 7.04 for

the quarter ended March 2012 from Rs. 6.44 for the quarter ended March 2011.

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� Break up of Expenditure

� Segment Revenue

� Recommends Dividend

CORE Education & Technologies Ltd has recommended 30% dividend for the

financial year 2011-2012, i.e., Rs. 0.60 per Equity Share of Rs. 2/- each, subject to

approval of the Shareholders.

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Company Profile

CORE Education and Technologies Limited founded in 2003, Corporate Headquarters

at Mumbai, India and International Headquarters lies at Atlanta and London.

The company is enabling in the creation of a better future across the globe by

providing transformational and innovative solutions for the entire education

continuum of K-12, Higher education and Vocational education.

CORE is a CMMi level 3 and ISO 9001:2008 certified company achieving a CAGR of

Rs. 10,912 million ($240 million) in FY10-11.

CORE’s offerings over assessment, ICT, content, teacher training, vocational training,

examination management system, language skills and has globally impacted more

than 85,000 schools, 31 million students & trained over 105,000 teachers.

CORE has been ranked No. 1 by the Business World in 3 categories viz. Value Ranking

(Revenues between 260Cr–Rs.1000Cr), 5 year performance, Sector “IT”. CORE is

included in Forbes 200 Asia’s best under a billion companies 2010.

CORE Education and Technologies Limited is India’s largest global education company

that has presence across 12 states in India, 20states in the US, 40 LEA and

institutions in the UK, 9 African and 3 Caribbean Countries.

Product & solutions

� Assessment and Intervention

� Compliance and Reporting

� Student Information Systems and Campus Management

� Grants and Financial Management

� Professional Development and Consulting

� Government Consulting and Training

� e-Content Creation and Management

� Education Portals

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� Child Tracking System

� Vocational Training

Key Alliances

� Oxford University

� Indira Gandhi National Open University

� Center for Higher Learning – NASA

� Microsoft Gold Partner

� Gujarat Knowledge Society & DVET

� Nationteacher.org

Customer Base

CORE’s education customer base is spread across the USA, UK, Africa, Sri Lanka,

Bahamas, Caribbean and India.

In India CORE has worked for many government bodies and offered solutions for their

specific needs. Recently CORE has bagged a prestigious contract worth Rs. 295 crores

from the Haryana Government aimed at benefiting five million students in 2622

schools of which 5 schools will be developed as "Smart" schools.

Some of the key customers in the US include Los Angeles Unified School District,

Texas Education Agency (TEA), North Carolina Department of Public Instruction,

Michigan Department of Education and many such prestigious departments and

institutions. In UK, we have catered to the needs of Shropshire Local Authority, East

Riding Council, Warwickshire Council and many more.

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Financial Results

12 Months Ended Profit & Loss Account (Consolidated)

Value(Rs.in.mn) FY11 FY12 FY13E FY14E

Description 12m 12m 12m 12m

Net Sales 10912.29 16378.57 19654.28 22602.43

Other Income 155.76 258.29 294.45 323.90

Total Income 11068.05 16636.86 19948.73 22926.32

Expenditure -6976.23 -10094.86 -12166.00 -13979.60

Operating Profit 4091.82 6542.00 7782.73 8946.72

Interest -786.97 -1271.40 -1423.97 -1566.36

Gross profit 3304.85 5270.60 6358.76 7380.36

Depreciation -586.23 -989.89 -1138.37 -1274.98

Profit Before Tax 2718.62 4280.71 5220.39 6105.38

Tax -468.51 -1049.80 -1305.10 -1526.34

Profit After Tax 2250.11 3230.91 3915.29 4579.03

Minority Interest 0.00 0.00 0.00 0.00

Share of Profit & Loss of Asso 0.00 0.00 0.00 0.00

Net Profit 2250.11 3230.91 3915.29 4579.03

Equity capital 218.29 224.94 224.94 224.94

Reserves 11608.24 17683.61 21598.90 26177.94

Face value 2.00 2.00 2.00 2.00

EPS 20.62 28.73 34.81 40.71

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Quarterly Ended Profit & Loss Account (Consolidated)

Value(Rs.in.mn) 30-Sep-11 31-Dec-11 31-Mar-12 30-Jun-12E

Description 3m 3m 3m 3m

Net sales 3532.22 4772.14 4818.90 5083.94

Other income 12.69 21.29 279.68 21.93

Total Income 3544.91 4793.43 5098.58 5105.87

Expenditure -2138.27 -2866.71 -3141.07 -3131.71

Operating profit 1406.64 1926.72 1957.51 1974.16

Interest -325.47 -328.99 -355.84 -391.42

Gross profit 1081.17 1597.73 1601.67 1582.74

Depreciation -130.56 -314.63 -388.54 -400.20

Profit Before Tax 950.61 1283.10 1213.13 1182.54

Tax -201.01 -255.84 -420.84 -295.64

Profit After Tax 749.6 1027.26 792.29 886.91

Minority Interest 0.00 0.00 0.00 0.00

Share of Profit & Loss of Asso 0.00 0.00 0.00 0.00

Net Profit 749.60 1027.26 792.29 886.91

Equity capital 221.15 224.26 224.94 224.94

Face value 2.00 2.00 2.00 2.00

EPS 6.78 9.16 7.04 7.89

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Key Ratios

Particulars FY11 FY12 FY13E FY14E

EPS (Rs.) 20.62 28.73 34.81 40.71

EBITDA Margin (%) 37.50% 39.94% 39.60% 39.58%

PBT Margin (%) 24.91% 26.14% 26.56% 27.01%

PAT Margin (%) 20.62% 19.73% 19.92% 20.26%

P/E Ratio (x) 14.45 10.37 8.56 7.32

ROE (%) 19.03% 18.04% 17.94% 17.34%

ROCE (%) 31.83% 29.13% 29.57% 29.07%

Debt Equity Ratio 0.24 0.44 0.38 0.33

EV/EBITDA (x) 7.95 5.12 4.31 3.75

Book Value (Rs.) 108.36 159.23 194.04 234.75

P/BV 2.75 1.87 1.54 1.27

Charts:

Net Sales & PAT

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P/E Ratio(x)

Debt Equity Ratio

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EV/EBITDA (x)

P/BV(x)

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Outlook and Conclusion

� At the current market price of Rs.298.00, the stock is trading at 8.56 x FY13E

and 7.32 x FY14E respectively.

� Earning per share (EPS) of the company for the earnings for FY13E and FY14E

is seen at Rs.34.81 and Rs.40.71 respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 27% and

27% over 2011 to 2014E respectively.

� On the basis of EV/EBITDA, the stock trades at 4.31 x for FY13E and 3.75 x for

FY14E.

� Price to Book Value of the stock is expected to be at 1.54 x and 1.27 x

respectively for FY13E and FY14E.

� We expect that the company will keep its growth story in the coming quarters

also. We recommend ‘BUY’ in this particular scrip with a target price of

Rs.335.00 for Medium to Long term investment.

Industry Overview

India's Information technology (IT) and information technology enabled services (ITeS)

segments are aligned in a way that the growth in one avenue has ripple effects on

another. The IT & ITeS industry, as a whole, is the mainstay of Indian technology

sector as it has driven growth of the economy in terms of employment, revenue

generation, standards of living etc and has played a major part in placing the country

on the global canvas.

National Association of Software and Services Companies (Nasscom) president Som

Mittal believes that software exports would be in tune with the estimates and are

projected to grow 15-17 per cent to generate about US$ 70 billion in 2011-12 as

against US$ 59 billion in 2010-11.

Furthermore, Internet and Mobile Association of India (IAMAI) has stated that internet

users in the country have crossed the 100-million mark (owing to increasing internet

penetration and affordability for personal computers (PCs), of which 17 million are

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online shoppers. It estimates that the number of Internet users in India will triple by

2015.

Rural India Calling

Rural business process outsourcing (BPO) units account for over US$ 10 million

towards India's IT-BPO revenues. Many big IT-BPO companies in India are getting

attracted towards hinterlands due to availability of immense untapped talent and

lower costs. Attrition rates in rural areas are just about 3-5 per cent as against a high

of 50 per cent in urban BPOs. Employee costs in rural BPOs is almost half as against

that of urban BPOs which bring overall operational costs down by almost 30-40 per

cent for IT companies. Nasscom has further stated that employee base in these areas

would expand by over 10 times by 2013-14 from 5000 in 2009-10.

Wipro BPO, the BPO arm of Wipro Technologies had launched its first rural BPO

centre at Manjakkudi Village in Tamil Nadu in August 2011. In October 2011, Infosys

BPO had inked an agreement with the Government of Andhra Pradesh to open rural

BPO centers in 22 districts. Rural Shores is another firm that had opened a BPO

centre in Bagepalli district of Karnataka and serves over 20 clients including HDFC,

Infosys, Wipro Technologies and Genpact. It aims to recruit more than 10, 000 youth

by 2014.

IT & ITeS - Key Developments and Investments

Between April 2000 and November 2011, the computer software and hardware sector

received cumulative foreign direct investment (FDI) of US$ 10.93 billion, according to

the Department of Industrial Policy and Promotion (DIPP).

• Network equipment maker Cisco Systems Inc.'s Indian unit is vying for a bigger

share of the IT spending by small and medium enterprises (SMEs) in 14 non-

metro markets. The company is planning to increase the amount of investments

on its distribution network in the smaller cities in 2012. It has also intensified

its research activities in order to develop India-specific products that in some

cases may cost just 20 per cent of the global product.

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• California-based IT services company UST Global is expanding its footprints in

India's IT capital Bengaluru. The company already operates in

Thiruvananthapuram and Kochi in Kerala. In Thiruvananthapuram also, the

company is building a 3 million sq ft campus which would be a major hub for

offshore IT services offered by the company.

Online Retailing on a High

Emergence of internet retailing and e-commerce as a completely new space is driving

the growth of number of online shoppers. As a result, the internet retailing companies

are getting attracted towards Indian markets which are poised to grow leaps-and-

bounds in the years to come. There are about 17 million online shoppers in India and

the number is projected to grow over three times in the years to come.

• Seattle-based world's largest internet retailer Amazon.com has recently

launched its website Junglee.com with a view to harness burgeoning online

shopping market in India which is expected to triple in size by 2015.

Junglee.com has partnered with several Indian online and offline retailers like

HomeShop18, Hidesign, Dabur Uveda, the Bombay Store and others. It has also

formed alliances with online players like Snapdeal, Univercell, Saholic (a Spice

Group firm) and Fommy.co.in.

• India's largest and most-funded e-commerce company Flipkart Online Services

Pvt. Ltd has acquired Letsbuy.com, the country's second-largest online

electronics retailer, for an undisclosed amount. The move reflects Flipkart's

strategy of becoming a major player through acquisitions and eventually

grabbing a substantial pie of ever- increasing Indian online retailing space.

Cloud Computing – The Emerging Technology

Cloud computing is a set of services that provide infrastructure resources using

internet media and data storage on a third party server, that is, the subscriber (of

cloud service) does not need to own the infrastructure, which saves him from entailing

any capital expenditure and he pays to the service provider as per his usage.

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The concept is on a high rage in India these days. The cloud solutions industry in

India is around US$ 400 million currently and by 2015 it is poised to grow 10 times to

US$ 4-4.5 billion. This further enhances the fact that Indian market is the most

mature when it comes to adoption of cloud technologies and has the highest usage

levels of converged systems.

• The state of Gujarat has over 10 per cent of 3 million small and medium

enterprises (SMEs) present in India. Hitachi Data Systems is ready to launch its

cloud services for the SMEs in Gujarat as they are searching for data backup

and email management services along with data and business analysis by cloud

solutions providers.

• Videocon and AEC Partners will jointly invest US$ 21 million in a cloud-

computing start-up called Nivio. The US$ 100 million-cloud computing

company will use these funds to expand its engineering centre in Palo Alto,

California and recruit fresh talent. AEC Partners is a US-based private equity

(PE) firm that holds expertise in technology investments.

Government Initiatives

Industry experts believe that increase in Government spends over e-governance

projects would be a major driver of growth for Indian IT/ITeS space. Nasscom has

stated that infrastructure for spends is ready and now is time when National e-

Governance Plan (NeGP) should be executed in full force. NeGP aims to create the right

governance and institutional mechanisms, set up the core infrastructure and policies

and implement various Mission Mode Projects across the Centre, state and integrated

service levels to create a citizen-oriented and business-centric environment for

governance.

Meanwhile, the Government has recently announced that it would buy some 100,000

low-cost Aakash tablets from Datawind (the Canadian company that has developed

this device) and would distribute them to students in schools and colleges for free. The

move comes as an effort to facilitate e-learning.

In another similar effort, IT major Intel India had joined hands with the Karnataka

Government's Sarva Shiksha Abhiyan in 2011 and had launched ‘Computers on

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Wheels'. It was a pilot e-learning program that entailed digital instruction materials

from reputed education solutions provider 'Educomp'. The program focussed to equip

teachers with learning techniques and tools and deliver diverse learning styles and

abilities to students, making education more participative rather than passive.

The Government of India has also undertaken a project that aims to provide high

quality broadband access to village Panchayats through National Optical fibre network

by 2014. The process is in progress and is projected to be very beneficial, especially for

the SMEs.

Software giant Infosys is planning to expand its footprint in India with focus on Tier-II

cities. The company has recently inked an agreement with Government of Madhya

Pradesh for setting up a development centre in Indore and is awaiting response from

Government of West Bengal for setting up a centre in Kolkata as well.

All such developments and initiatives on part of the Government of India reflect the

fact that the supreme administration is making all the possible efforts to boost the

country's IT and ITeS industries.

IT & ITeS in India - Road Ahead

There are many predictions and forecasts pertaining to IT & ITeS in India across

various segments.

For instance, a study by management advisory firm Zinnov states that IT adoption in

Indian SME segment is growing at a rate of 15 per cent and would touch US$ 15

billion by 2015. The study noted that as of now, only 20 per cent of the total 50 million

SMEs in India are technology-ready today which poses an immense scope for further

growth.

Another study by consulting and advisory services firm CyberMedia Research suggests

that the PC market in India would have witnessed sales of 11.15 million units in the

2011 calendar year which would further accelerate by 14 per cent to 12.71 million

units in 2012.

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Internet retailing is also emerging as an entirely new avenue to be explored. According

to estimates made by an industrial body, India's online retail industry is anticipated to

surge to Rs 70 billion (US$ 1.43 billion) by 2015 from Rs 20 billion (US$ 405.93

million) as broadband is becoming increasingly accessible and internet penetration is

increasing. Another report by Avendus Capital Pvt. Ltd states that e-tailing would

become a Rs 53,000 crore (US$ 10.76 billion) market by 2015 from the current Rs

3,600 crore (US$ 731 million).

______________ ____ _________________________ Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation

for the purchase or sale of any financial instrument or as an official confirmation of any

transaction. The information contained herein is from publicly available data or other

sources believed to be reliable but do not represent that it is accurate or complete and it

should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s

affiliates shall not be in any way responsible for any loss or damage that may arise to any

person from any inadvertent error in the information contained in this report. This document

is provide for assistance only and is not intended to be and must not alone be taken as the

basis for an investment decision.

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Firstcall India Equity Research: Email – [email protected]

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