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Sunday, August 19, 2012

Zee Learn - Benefit from rapidly growing Pre-school Education segment!

We all know the 4 P's of Marketing that we learnt in MBA class - Product, Promotion, Price and Place. A few years back, a CEO of Toy MFG firm taught me another P of marketing - the Fifth P. Its called Pester Power, the amazing pestering power of kids over parents, how they bargain for toys, clothes, candies and what not. Firms in this segment realize this pester power to target this fifth P and market their products with innovation!

In context of India though, pestering is critical, but more important is to understand the emotional makeup of parents, who maybe frugal when it comes to their own shopping but spend over the top for kid's education, clothes and whatever else they deem necessary for their ward. There is a established trend in most cities for toddlers to attend best Playschools which are often branded Playschool chains such as Kidzee. Kidzee is largest preschool chain in Asia, with more than 900 pre-schools in 330 cities across India. It caters to more than 40,000 students and boasts of proprietary teaching curriculum, content and methodology for children.

Zee Learn which operates Kidzee is a listed firm, and belongs to business house Essel group. Zee Learn is the only listed firm in India which operates in this unique segment catering to play-schools and pre-schools.

From Pre-schools, Zee Learn has now diversified into schooling as well with Mount Litera Zee Schools. It is now second largest chain of private schools in India with more than 65 schools operating under this chain across India from Gaya in Bihar to Goa, mostly operating in B-towns across India. Zee Learn is also entering other segment such as International Schools and International Pre-schools under this brand.

Additionally, Zee Learn also operates couple of specialized colleges such as Zee Institute of Creative Arts and Zee Institute of Media Arts.

Fundamentally speaking, Zee Learn's topline growth has been rapid from INR 19.9 crores in 2010 to 43.9 crores in 2011 and 61 crores in 2012. On a quarterly basis, the current revenue runrate is INR 23 crores in Jun, 12, which translates to about INR 80+ crores revenues in following year. Thus the firm is growing aggressively due to its unique positioning and brand presence.

A unique thing about this stock is that, majority of share holding resides with promoters, which currently own more than 70% of the stock, which has gone up from 66% that they owned two quarters back. Thus owners are buying their own stock which is good news for investors.

Promoters are not the only one's buying this stock. FII ownership has gone up from 7.6% two quarters ago to 11.7% now. Only pack which is selling is General public investors, whose ownership is down from 9.6% to 7.6%.

Firm is not profitable yet, which is understandable because of their growth startup approach, but with Essel group backup, one should look at revenue growth and market share before looking at pure EPS numbers on a quarterly basis.

Technically speaking, 50 SMA is above 200 SMA for this scrip, so stock is out of Bear grip. At INR 30-32 range, there is possible resistance zone, so stock will gain considerably once it crosses 32 range comfortably.
There is possible support at various price points, from INR 18 to INR 24, so buy at decline strategy makes sense. This is definitely a long term growth stock for anyone's portfolio.

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