THE government’s thrust on the education sector and the decision to set up model schools through private-public partnership has made brokerages bullish on the sector. ICICI Securities feels that even while consumer spending is declining across sectors, education spend is unlikely to witness any fall. It also expects the Right to Education Bill to be introduced in the parliament within a few weeks. In a recent report, the domestic brokerage has reiterated a buy on NIIT and maintained a hold on Educomp Solutions.
The government has significantly increased its education outlay to 5% of GDP from the current 3%. Also, it has recently announced setting up 2,500 model schools (of 6,000 schools) via public-private partnership at an estimated cost of Rs 93.2 billion. It also feels that education spend is the last item to be cut by private households in the current slowdown as it forms a mere 7-8% of the total consumption expenditure and parents want to provide the best to their kids.
Interestingly, ICICI Securities feels that in case of an economic downturn, innovative and cheaper modes of education like online mode, virtual classroom etc may be preferred. Overall, it believes education spend will have minimal impact given the importance of education to achieve and sustain economic growth over a longer period of time.
According to the brokerage, there are more than 100 million students that are currently out of the basic schooling system, which implies a huge potential for companies that are a part of the education sector. More than 100 million students are currently out of the basic schooling systems. ICT project tenders are floated predominantly in H2FY as the government would like to utilise its allocated budgets before the fiscal year end.
The companies which undertake large ICT projects (from setting up to operating computer education and other computer aided learning programmes for government schools) would be a key beneficiary from the increased impetus to education, it adds. The Right to Education Bill, which the brokerage expects to be tabled within few weeks, would bring more students within the education umbrella.
The brokerage has reiterated a buy on Educomp given its annuity-based unpenetrated Smart Class business model, high growth in ICT and perpetuity-based K-12 school business, all of which provide long-term high growth, better margins and predictable cash flows. ICICI Securities expects Educomp to raise its guidance for school addition in Smart Class business and positively surprise the market with strong Q3FY09 results.
Meanwhile, the brokerage has maintained a hold on NIIT with a target price of Rs 39 per share as it feels that the company is entering a seasonally weak H2FY with concerns on lower growth in individual learning solutions (IT and non-IT due to economic slowdown) and discretionary nature of US centric corporate learning solutions.
The government has significantly increased its education outlay to 5% of GDP from the current 3%. Also, it has recently announced setting up 2,500 model schools (of 6,000 schools) via public-private partnership at an estimated cost of Rs 93.2 billion. It also feels that education spend is the last item to be cut by private households in the current slowdown as it forms a mere 7-8% of the total consumption expenditure and parents want to provide the best to their kids.
Interestingly, ICICI Securities feels that in case of an economic downturn, innovative and cheaper modes of education like online mode, virtual classroom etc may be preferred. Overall, it believes education spend will have minimal impact given the importance of education to achieve and sustain economic growth over a longer period of time.
According to the brokerage, there are more than 100 million students that are currently out of the basic schooling system, which implies a huge potential for companies that are a part of the education sector. More than 100 million students are currently out of the basic schooling systems. ICT project tenders are floated predominantly in H2FY as the government would like to utilise its allocated budgets before the fiscal year end.
The companies which undertake large ICT projects (from setting up to operating computer education and other computer aided learning programmes for government schools) would be a key beneficiary from the increased impetus to education, it adds. The Right to Education Bill, which the brokerage expects to be tabled within few weeks, would bring more students within the education umbrella.
The brokerage has reiterated a buy on Educomp given its annuity-based unpenetrated Smart Class business model, high growth in ICT and perpetuity-based K-12 school business, all of which provide long-term high growth, better margins and predictable cash flows. ICICI Securities expects Educomp to raise its guidance for school addition in Smart Class business and positively surprise the market with strong Q3FY09 results.
Meanwhile, the brokerage has maintained a hold on NIIT with a target price of Rs 39 per share as it feels that the company is entering a seasonally weak H2FY with concerns on lower growth in individual learning solutions (IT and non-IT due to economic slowdown) and discretionary nature of US centric corporate learning solutions.
