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A volatile market and a slowing economy mean that investors need to take exposure to stocks that could remain relatively insulated to the macro environment.
Coaching for board exams and various professional courses is one industry that is expected to remain resilient and even thrive. Getting into quality educational institutions that have limited seats remains top priority for students across the country. As a play on this theme, MT Educare, with its strong positioning in the lucrative Mumbai market, looks set to ride the opportunity.
Investors with a two-year horizon can consider buying the stock in the light of its growth prospects. At Rs 107, the stock trades at 16 times its likely per share earnings for FY13. This is at a premium to peers such as Career Point. But MT Educare is a much larger player in terms of revenues with sustainable growth prospects. It also has more diversified offerings.
MT Educare has seen increasing enrolments across its three segments of operation — school, science and commerce. Over the last three years, the company has seen student enrolment rise from 44,317 in FY09 to 66,534 in FY-12. MT Educare coaches students in classes IX to XII with a focus on board exams — State, CBSE and ICSE. It also trains them for other courses such as CA and competitive exams for engineering admissions, mainly Maharashtra and Karnataka. The company operates 196 coaching centres across 116 locations in Maharashtra, Karnataka, Tamil Nadu and Gujarat, up from 188 and 110 for the previous year. The lucrative Mumbai market is the mainstay for the company. In FY12, the company saw its revenues grow by 23.8 per cent over the previous fiscal to Rs 130.6 crore, while net profit rose 62.9 per cent to Rs 13.2 crore. Even if the multiple State entrance exams are scrapped in favour of a single engineering or a medical test, it seems unlikely that board exams would be done away with. In fact even for admission to premier institutes such as the IITs, school board marks would now be given significant weightage. The same holds for the National Institutes of Technology as well. A recent report by Crisil shows that spending on coaching could account for as much as 28 per cent of the total annual expenditure on education ofstudents in India. That figure is higher in Maharashtra and Karnataka, MT Educare’s key markets.
The key challenge would be to retain top faculty with salary increases.
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