Accumulate Tree House Education; target of Rs 433: Angel

Angel Broking's report on Tree House Education and Accessories
For 1QFY2016, Tree House Education & Accessories (THEAL)’s top-line and bottom-line have come in in line with our estimates. The top-line growth was strong mainly due to strong addition of 35 new pre-schools. On the bottom-line front, the company has reported healthy numbers due to strong revenue growth and operating performance. However, lower other income and higher taxes restricted profitability.

Top-line grows ~28% yoy: THEAL’s top-line rose by ~28% yoy to ~Rs 69cr which is in line with our estimate. The growth came on the back of strong addition of preschools as well as growth in existing pr-schools. During the quarter, the company has launched pre-shcools in new cities like Solapur, Sangli, Akola, Bareilly, Aurangabad, Satara, Amravati, Hoogly, and New Delhi.

Outlook and Valuation: "We continue to remain positive on the stock, as we believe THEAL will continue to register robust growth going ahead, with consistent expansion of pre-schools and repayment of debt which would boost earnings. We expect the company to post a revenue CAGR of 24.9% to Rs 324cr while EBIDTA is expected to grow at a CAGR of 24.4% to Rs 184cr over FY2015-FY2017. The Adj. net profit is expected to grow at a CAGR of 22.7% to Rs 92cr over FY2015-17. We recommend an Accumulate rating on the stock, with a target price of Rs 433, valuing the stock at 20x on FY2017E EPS of Rs 21.7", says Angel Broking research report.

For all recommendations, click here

Read More