Stock Review: Jetking Infotrain

 

There is a fancy for education stocks in the market. Now, in spite of that this is one stock which has been ignored by the market players. This is, probably because of the lacklustre financial performance of the company over the last two year—growth and profits have almost been flat for the past two years—but I believe these negatives look fully discounted in the current stock price of about Rs 140-145. This is a company which is into hardware training, it operates in a niche segment and there is no other listed company involved in hardware training.

Also, if you talk about any other player in the hardware training, you have small regional players but if you talk of somebody at national level only Jetking Infotrain. This company has got about 125 training centres all across the country.

If one looks at the financials of the company, the FY10 sales were about Rs 45 crore, which were almost flat compared to FY09. Profit after tax (PAT) was about Rs 10 crore—there was a decline of over 20% over FY09. EPS comes to about Rs 16-17. In the June quarter also sales are down by about 10% to Rs 10 crore. Meanwhile PAT is down by about 20% to about Rs 1.9 crore.

However, in spite of the lackluster performance we believe that this is a company, which has got a niche positioning and the potential for the growth in the segment is good especially in the smaller cities.

As per the past track record, the company has been a regular dividend payer for the last past 10 years. In fact it used to pay very high dividends of 150% in 2007 and 2008. It is a totally debt-free company having cash and cash equivalents of about Rs 20 crore, which means the market cap at the current price is about Rs 85 crore. This means the business is valued at about Rs 65 crore after taking cash into account.

The company has given three bonuses in the past six years. Out of the total equity of about Rs 6 crore, Rs 5 crore is constituted by bonus shares. Of course there are short-term challenges which the company is facing and the growth has almost been flat for the past two years but there is tremendous opportunity available to the company. The company has got well established brand and the company can leverage its brand and also its network for future growth.

When you talk of hardware training the only name, which comes to your mind is Jetking, which is a huge positive for the company. The company was also associated with Delhi Daredevils team in the DLF IPL. So it's got a good brand name. It's got lot of positives. Of course there are short-term challenges which I believe are fully discounted in the stock price. The company, because of its niche positioning, should at least command premium valuations. But available at a price to earning multiple of about 8-9 times compared to 15 to 40 times, which most other education companies command. I believe the stock is hugely undervalued and it has got good potential for growth in the future.