Everonn Education - Long Term Stock Pick
Evenronn is a next-generation educational service provider which specializes in providing VSAT-enabled virtual and interactive classrooms to its emphasis on offering only the highest-quality content to students. Evenronn provides Web-Enabled Learning Solutions. Evenronn currently has web products such as www.classontheweb.com which is a curriculum-based eLearning portal that caters to all the academic needs of students with a focus on helping them enhance their performance at school. It also operates recruitment web portals such as www.schooljobs.in and www.collegejobs.co.in.
Education sector itself is a growing sector and has tremendous oppurtunities in India. Education in India is a recession proof sector and Everonn has the potential to scale its operations due to so much of untapped potential in this space in India.
What are the advantages?
- Everonn is reporting high growth of 50-80% in revenues and profits in the last three years.
- Everonn has good potential to get orders from Governement that is planning to start schools with private partnership.
- Everonn is most domestic consumption based company (though it has plans to go international) and education sector is kind of a recession proof sector and provide oppurtunities even in bad times. And in India, the importance of quality education is becoming more and more important and more schools and colleges need to adopt the latest innovations in this sector sooner than later.
- Long term contracts with governments and schools provide safe earnings for the company.
- Braodband Internet is fastly becoming available to rural areas which helps Everonn to introduce its Online leaning programs even in rural areas.
- Evernonn might post consistent growth of 50-60% in both revenues and profits for the next few years.
- In Q3 2009-2010, Everonn reported close to 85% sales growth and 55% profit growth.
Concerns
- Everonn is curretly a small cap company, hence prone to high fluctuation. Buy only when it falls and is trading at reasonable prices.
- Entry barrier in this sector is low. So Everonn can enter high margin sectors. At the same time other companies also can quick enter this space and become compititors to Everonn. So you need to watch the situation.
- Needs high capital requirementsin Instructional Computing technology but margins are not that high at present. Company currently has around 25 crore cash in reserve.
Estimates and Targets:
FY 2009-2010
- P/E: 12 to 14
- EPS: 24
- Target Price: 340 (300 to 420 range based on bare or bull market scenarios)
FY 2010-2011
- P/E: 13-15
- EPS: 35
- Target Price: 540
FY 2011-2012
- P/E: 15-16
- EPS: 47
- Target Price: 720
Verdict
Stay innested in Everonn for atleast two years to get maximum profits from this. Even on a P/E of around 15, the company can give 100% returns in two years, and there is much scope for it to be trading at P/E of 18-19, in which case you may get around 120% profits in two years. Management is currently projecting an EPS of 55 by March 2012. My estimates are very conservative and and on safe side.
Invest in stock based on your own research. This article is only to provide a guide line. I am not responsible for your investments.
