Buy MT Educare; target of Rs 145: Khambatta Securities
Khambatta Securities’ research report on MT Educare
MT Educare’s (MT’s) FY19 core operating results are line with our estimates. The company reported a profit at the operating and net levels after registering losses in FY18 on account of one-time expected credit loss (ECL) provisions relating to Aryan Foundation, Sri Gayatri Educational Trust, certain government projects, and other debtors. While operating revenue came in marginally lower than our expectation, EBITDA was in line, leading to 50 bps higher EBITDA margin (12.5%). PAT was higher than our estimate due to higher-than-expected other income. The higher other income is attributable to a reversal of losses booked in the previous year.
We continue to expect robust topline growth and healthy margin expansion over the next couple of years. After appreciating 32% since our initiation report dated 26 March 2019, the MT stock is currently trading at 11.5x FY21E EPS. Valuing at 19x FY21E EPS, our price target is revised upward to Rs 145 (from Rs 137) with a potential upside of 65% and informing a BUY rating.
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