Consolidated Results
| Q3 results in Cr |
Informal Education |
Formal Education |
Total (excluding auto division) |
| CapEx |
174 |
159 |
335 |
| Revenue |
19.55 |
(2.93) |
16.62 |
| Results |
4.64 |
0.83 |
5.47 |
| Finance apportioned based on CapEx |
(0.64) |
(0.60) |
(1.20) |
| Expenses Unallocated apportioned |
(0.65) |
(0.61) |
(1.26) |
| PBT |
3.35 |
(0.38) |
2.97 |
The management expects the company to cross a revenue of 70 cr this year. Historically the company has been able to achieve operational margins in excess of 35% on revenues of 60 cr also. However, this year, the company has had a double whammy on its books 1) because of the change in educational policy and 2) change in the organisational structure. Both of these effects should be ironed out in FY16.
The company will have begun receiving interest in excess of at least 7% (after tax) on at least 200 cr next year, from its educational loan business, its investments as well as its loan to its trust.
Quantity growth 30% and price growth 15% next year is expected in the informal education space alone.
CareerPoint has advanced an additional loan of 20 cr to its trust. The reasons have not been made clear.
In 2012, Career Point did not have the formal education business, the vocational business or any presence in the online business and it still had a PAT of 32 cr on a Revenue of 80 cr. This revenue will definitely be regained next year with additional levers. Im sure the company should exceed a PAT of 40 cr by 2017. If the market continue to be optimistic a 20-25x multiple will put put the company in the 800-1000cr M.Cap. The worse case it should trade at a 15x which is still in excess of 600c, a doubler from here.
It is quite clearly established that the company seems to be on a good growth track and will generate large positive cash flows in the future, what seems to worry me is their ability to re-invest the money at high ROE’s. There has been no evidence to suggest that they can ! Recently the management did something rather dumb. They bought into a Hyundai Car dealership ! Preposterous ? Absolutely. It does not matter whether that business will be profitable or not, but it will require a little management attention everyday, which is bad. Worse thing about it is that they put in just about 50 lakhs for this business.
While i am sure that the company will give 2-4x returns from here based on the cash generation capacity, more of their success will depend on how they deploy the cash.
Somebody please buy the management a book on value/ cash flow based investing. Wait, i think i will do it myself !
So, sir is it a buy now? Or can we wait for a good while and take a call after it starts moving.
Arvind I think you have misunderstood my post. I am questioning the managements ability to invest and you are asking me if you should invest.