CL Educate Limited - Preparing for the big Test: Angel Broking

Views of Mr. Amarjeet Maurya (Sr. Research Analyst - Mid Caps, Angel Broking):

"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."

Source : Equity Bulls

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