Tree House Education & Accessories Private - Diwali Pick 2012 - GEPL Capital

- Highest Self-Owned Pre School in India

- Organic & Inorganic growth/Expansion

- Well-established player in rapidly-growing sector

- As the company operates in high growth oriented sector, P/E multiples are bound to be higher to compensate its growth. Hence we have valued the company by discounting Enterprise Value to its sales (EV/Sales) as we believe that education is still the sunrise sector in the Indian markets. We expect revenue to grow at a CAGR of 44% from FY12 to FY14, EBIDTA to grow at CAGR of 36% with EBITDA margin of 43%. Profit after tax is also expected to grow at a CAGR of 39% during the same period.

At CMP the company is valued at 9.9x as per EV/sales method. Looking at the secular growth which the company is going to witness and aggressive growth drive undertaken by the management, we apply an exit EV/Sales multiple of 6x. With which we arrive at the target Price of Rs.280, implying the potential upside of 24% from current levels.

Source : Equity Bulls

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