Dalmia Securities
Zee Learn (Buy)
CMP: ₹36.2
Target: ₹50.2
Zee Learn (ZLL) owns and operates Kidzee, Asia's largest pre-school chain with 1800+ centres in over 700 cities catering to 1,35,000+ kids and Mount Litera Zee School (MLZS) India's fastest growing K-12 network with 120+ schools across 110+ cities touching the lives of 52,000+ students. It also offers vocational training via Zee Institute of Media Arts (ZIMA) and Zee Institute of Creative Arts (ZICA). ZLL's recently forayed into the Manpower supply & Training business via Liberium.
Huge scope for improving capacity utilisation: Average enrollment per Kidzee centre is about 75, against full capacity of about 150 per centre, translating into capacity utilisation of 50 per cent. Average enrollment per MLZS is about 450, against full capacity of about 1,800 per school translating into capacity utilisation of 28 per cent as the schools are just 5-6 years old which provides ample operating leverage.
Potential sale of asset heavy Digital Ventures Pvt Ltd (DVPL) re-rating trigger: ZLL management has announced its intention of divesting its DVPL portfolio (holding 6 MLZS) via REIT or other means and expects to realize anywhere between ₹600-700 crore. If the sale goes through, ZLL will be able to reduce its debt which stands at ₹242 crore. With reduction in debt we expect ROE to improve going forward.