Technology

For 2QFY2016, MT Educare reported results above our estimates. The company’s
top-line growth was strong mainly due to firm growth in Robomate product sales
as well as Government Projects segment. However, the core coaching business
was subdued during the quarter. On the operating front, the company saw
pressure due to increase in other costs. However, higher other income and a lower
tax expense boosted the company’s overall profitability.
Strong growth in Robomate product sales and Government Projects segment boost
overall consolidated top-line: For the quarter, MT Educare registered a doubledigit
growth in its top-line, ie of 26% yoy to ~Rs83cr, on back of strong growth in
Robomate poduct sales (at Rs17.6cr) as well as in the Government Projects
segment. However, the core coaching business was subdued during the quarter.
PAT grew ~21% yoy: Despite of operating margin pressure, which was on account
of higher other costs, MT Educare posted a net profit growth of ~21% yoy to
~Rs14cr, owing to strong revenue growth, higher other income and lower taxes.
Outlook and valuation: We expect MT Educare to report a strong top-line and
bottom-line growth in the coming financial years (FY2016E and FY2017E) on back
of healthy growth in coaching business (school, science and commerce). This
would be owing to its strong brand image and with it implementing innovative
teaching technologies. Further, we expect additional revenue growth from
execution of government projects, Robomate product, and tie up with Shri Gayatri
Educational Society (SGES) in Hyderabad which has a model similar to preuniversity
(PU) colleges. Hence, we recommend a Buy rating on the stock with a
target price of Rs169.

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