APTECH EQUITY RESEARCH

HomeCompanyAptech Equity Research

Date of Research – 12 January 2016

Price – Rs. 69.15

About the Company

Aptech Limited (“Aptech” or the “Company”) provides IT courses and business
education.Aptech’s portfolio of businesses includes two broad segments, viz. Individual Training
and Enterprise Business. The Individual Training segment caters to directly to an individual
student/customer typically through Retail formats. Enterprise Business segment addresses
education needs of government, institutional and corporate customers. Individual Training –
Brands include Aptech Computer Education; Aptech Hardware & Networking Academy; Arena
Animation; Maya Academy of Advanced Cinematics; Aptech Aviation & Hospitality Academy;
Aptech English Learning Academy. Enterprise Business – Brands include Aptech Assessment &
Testing Solutions; Aptech Training Solutions.

Key Financial Figures

Consolidated (Rs. Cr)

Particulars FY 2013 FY 2014 FY 2015 FY 2016 FY 2017

Total Income from Operations 169.24 181.70 170.49 163.33 213.33

Expenses 142.50 146.70 145.90 143.26 183.79

Earnings Before Other Income, 26.74 35.00 24.59 20.07 29.54

Interest, Tax and Depreciation
(Operating Profit)

Depreciation 8.80 7.98 9.78 10.33 10.72

Finance Costs 0.28 0.28 0.37 0.28 0.04

Other income 12.96 8.85 4.67 3.51 3.20

Exceptional items (8.00) – – – –

PBT 38.62 35.59 19.11 12.97 21.98

Tax 7.22 7.35 3.42 2.78 3.27

PAT (before Minority Interest and 31.40 28.24 15.69 10.19 18.71
share of Associates)

Profit/ (loss) attributable to Minority – – – – –

Interest

Share of profit / (loss) of Associates 0.10 0.05 0.04 0.02 –

Consolidated Profit / (Loss) for the 31.30 28.19 15.65 10.17 18.71
year

Profitability Analysis
Consolidated (%)

Particulars FY 2013 FY 2014 FY 2015 FY 2016 FY 2017

Operating Profit Margin Ratio 15.80 19.26 14.42 12.29 13.85

Net Profit Margin Ratio 18.49 15.51 9.18 6.24 8.77

Operating profit margin is a measurement of the proportion of a company’s revenue that is left
over after paying for production costs such as raw materials, salaries and administrative costs.
Net profit margin is arrived at by deducting non operating expenses such as depreciation, finance
costs and taxes out of operating profit and shows what is left for the shareholders as a percentage
of net sales. Together these ratios help in understanding the cost and profit structure of the firm
and analysing business inefficiencies.

 Profitability Ratios

Key Balance Sheet Figures

Sources of Funds / Liabilities (Rs. Cr)

Particulars FY 2013 FY 2014 FY 2015 FY 2016

Share Capital 48.79 39.89 39.89 39.89

Money received against warrants 0.13 – – –

Reserves & Surplus 292.11 185.05 183.11 188.70

Net worth (shareholders funds) 341.03 224.95 223.00 228.60

Current liabilities 50.47 40.50 35.59 29.43

Other long term liabilities and 3.25 2.28 2.12 1.83

provisions

Total Liabilities 394.75 267.73 260.71 259.86

Application of Funds / Assets (Rs. Cr)

Particulars FY 2013 FY 2014 FY 2015 FY 2016

Fixed Assets 32.01 33.92 33.78 32.64

Noncurrent Investments 110.89 110.84 110.83 110.82

Current assets 160.23 93.24 81.93 79.07

Long term advances and other 25.99 29.72 34.17 37.32

noncurrent assets

Goodwill on consolidation (net) 65.63 – – –

Total assets 394.75 267.73 260.71 259.86

Efficiency Analysis
(%)

Particulars FY 2013 FY 2014 FY 2015 FY 2016

ROCE 7.84 15.56 11.03 8.78

ROE / RONW 9.18 12.53 7.02 4.46

Return on Capital Employed (ROCE) measures a company’s profitability from its overall
operations by calculating the return generated on the total capital invested in the business (i.e.
equity + debt). Return on Equity (ROE) or Return on Net Worth (RONW) measures the amount
of profit which the company generates on money invested by the equity shareholders. In short,
ROE draws attention to the return generated by the shareholders on their investment in the
business. Together these ratios can be used in comparing the profitability of the company with
other companies in the same industry.

 Efficiency Ratios

Valuation Analysis
Consolidated

Particulars FY 2013 FY 2014 FY 2015 FY 2016 FY 2017

Total Income from Operations 169.24 181.70 170.49 163.33 213.33

(Rs. Cr.)

Growth (%) – 7.36 % (6.17 %) (4.20 %) 30.61 %

PAT (Rs. Cr.) 31.30 28.19 15.65 10.19 18.71

Growth (%) – (9.94 %) (44.48 (34.89 83.61 %

%) %)

Earnings Per Share – Basic (Rs. ) 6.41 6.35 3.92 2.55 4.69

Earning Per Share – Diluted (Rs. ) 6.41 6.35 3.92 2.55 4.63

Price to Earnings 6.60 11.84 14.73 22.65 45.91

 Price Earnings Ratio

Dividend History
The Company has maintained a dividend yield of 4.75 % over the last 5 financial years.

Liquidity and Credit Analysis

Current Ratio

Higher current ratio implies healthier short term liquidity comfort level. A current ratio below 1
indicates that the company may not be able to meet its obligations in the short run. However, it is
not always a matter of worry if this ratio temporarily falls below 1 as many times companies
squeeze out short term cash sources to achieve a capital intensive plan with a longer term outlook.
Aptech’s average current ratio over the last 3 financial years has been 2.59 times which indicates
that the Company is able to pay its short term obligations.

Long term Debt to Equity Ratio

Companies operating with high long term debt to equity on their balance sheets are vulnerable to
economic cycles. In times of slowdown in economy, companies with high levels of debt find it
increasingly difficult to service the interest on their borrowings as profit margins decline. We
believe that long term debt to equity ratio higher than 0.6 – 0.8 could affect the business of a
company and its results of operations.

Aptech’s average long term debt to equity ratio over the last 3 financial years has been 0.00
times which indicates that the Company operates with zero debt.

Interest Coverage ratio

Interest coverage ratio indicates the comfort with which the company may be able to service the
interest expense (i.e. finance charges) on its outstanding debt. Higher interest coverage ratio
indicates that the company can easily meet the interest expense pertaining to its debt obligations.
In our view, interest coverage ratio of below 1.5 should raise doubts about the company’s ability
to meet the expenses on its borrowings. Interest coverage ratio below 1 indicates that the
company is just not generating enough to service its debt obligations.

Aptech’s average interest coverage ratio over the last 3 financial years has been 95.65 times
which indicates that the Company can meet its debt obligations without any difficulty.

 Liquidity & Credit Ratios

Ownership pattern
In its latest stock exchange filing dated 31 March 2017, Aptech reported a promoter holding of
49.30 %. Large promoter holding indicates conviction and sincerity of the promoters. We believe
that a greater than 35 % promoter holding offers safety to the retail investors.

At the same time, institutional holding in the Company stood at 5.44 % (FII+DII). Large
institutional holding indicates the confidence of seasoned investors. At the same time, it can also
lead to high volatility in the stock price as institutions buy and sell larger stakes than retail
participants.

About the Author

 Rajat Sharma is a well known stock market analyst and commentator. He has covered
Indian markets for over a decade and is regarded for consistently identifying early stage
investment opportunities. Attorney by qualification, Rajat has done extensive work for
improving corporate governance and disclosure standards.

Post Tags - equity research, stock analysis

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