A Wide Array of Services and a Vast Network: The company provides various services, such as online application solutions, e-learning platforms, and skill development programs. MKCL has a network of over 5,000 Authorized Learning Centers (ALCs) across Maharashtra and has trained over 11 million people since its inception.
Revenue Growth: The company's revenue has experienced a substantial rise, climbing from ₹120.2 crore in FY22 to ₹177.5 crore in FY23, indicating a growth rate of 47.7%. The company experienced a decline in revenue during FY20 and FY21 due to the lockdown, primarily attributable to its presence in offline centers across Maharashtra. This factor is responsible for the company's five-year Compound Annual Growth Rate (CAGR) resting at 3.0%.
Operating Margins: Operating Margins of the company increased from 13.6% in FY22 to 22.1% in FY23. The leadership skillfully controlled operating expenses, contributing to this improvement in margins. The average operating margin over the last five years of the company is 18.4%.
Profitability Ratios: Company has lower ROCE of 7.7% in FY23 vs industry average of 11%.
Key Stakeholders: The Government of Maharashtra (GoM), ten state universities, educational institutions, community institutions, and both IT and non-IT industries constitute the primary equity holders. Among major shareholders GoM holds a 37.13% stake, while the University of Mumbai holds 4.5%.
Investment Thesis: In comparison to other companies in its industry, Maharashtra Knowledge Corporation Ltd. seems to be moderately undervalued, presenting an EV/EBITDA ratio of 9.8x (adjusted for a 20% discount due to its non-listed status). This valuation appears slightly below the current industry average of 11.4x, indicating an intrinsic value of the stock around ₹625.
Despite the positive performance in FY23, enhanced margins, and the undervalued status, we are maintaining a neutral rating. This decision is influenced by the management's lack of interest in pursuing an IPO, thereby eliminating an exit option for investors. Additionally, the company exhibits comparatively weaker profitability ratios compared to its peers.
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