CL Educate Ltd (CLEL) is a diversified and integrated technology-enabled provider
of education products, services and content with presence across the education
value chain. It focuses on learners of multiple age groups and caters to the
various segments of the education industry like test preparation & training
services, publishing & content development, marketing & sales services for
corporates, vocational training, integrated solutions to educational institutions &
universities and K-12 education. As on September 30, 2016, the company had
151 test-prep centers spread over 87 cities in India, 8 K-12 schools spread across
6 cities & 28 vocational training centers and offices. In terms of valuations, the pre-issue P/E works out to
23.2x its annualised 1HFY2017 earnings (at the upper end of the issue price
band), which is higher compared to its peers, (MT Educare is trading at 8.9x its
annualised 1HFY2017 earnings). Also, CLEL’s EV/sales multiple at 2.1x, works
out to be at premium to MT Educare’s 1.2x. On EV/EBITDA front too, CLEL’s issue
appears to be unattractive 15.1x v/s. MT Educare’s 5.4x. Moreover, as compared
to its peers the margins and ROE profile of CLEL does not appear to be attractive.
The company’s business is working capital intensive which coupled with expensive
valuations may not provide a significant upside to the investor. Hence, we
recommend neutral rating on the issue.
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