CL Educate heads into a positive cycle

After 2 years – FY20 and FY21 – of hanging tough, CL Educate appears to have entered a cycle of positive developments from FY22.

Q1 FY22 results showed early indications of this.

Firstly, there are signs of return to growth, despite Covid-2 wave still going strong in Q1 FY22. Stand alone revenue was up 12%, while consolidated sales were up 10%.

EBITDA situation was healthy. CL’s consolidated EBITDA margin for Q1 was 12%, the highest it has declared since listing. Standalone EBITDA was 12.4%, slightly less than 13.5% of Q1 FY21. Salary restoration was one reason for the slight dip. The subsidiary businesses had a combined EBITDA of 11%, the highest in the last 6 quarters. Among the subsidiary businesses, the Kestone business  has struggled since Covid, but now it is showing signs of return to better health.

The company also announced new progress in its digital initiatives, particularly on the Kestone side. It has launched a new version of its virtual platform with 3 distinct segments: DIY (do-it-yourself) platform, a webinar platform, and a virtual store platform. The platform is branded ‘VOSMOS’. There is good traction on VOSMOS: Q1 FY22 revenue was $0.75m, as compared to $1m for the whole of FY21.

On the Test Prep side, the company mentioned it is looking at an important acquisition in the UPSC exam segment, which could transform its presence in the government services exam space. This is a big space, next only to JEE (engineering) and medical exam segments. CL has been hunting for a new segment to grow in, apart from MBA and Law segments where it the leader.

The net cash position remains at similar levels to Mar’21, net cash as on Jun’21 was Rs 30 crore. This is expected to improve by Sep’21 and could touch Rs 40 crore. A land sale is expected to go through in August, which could fetch Rs 7 crore. CL is also expecting tax refund.

The stock price has done well in recent weeks. However, an Entity Value of Rs 160 crore at this price still places CL Educate at a valuation of around 6x FY21 EBITDA.

Wisdomsmith’s Investor Relations team (WISDOM IR) advises CL Educate on Investor Relations.

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