>EVERONN SYSTEMS LTD. (KR CHOKSEY)

Investment Rationale
Everonn Systems India Ltd is a leading education and training company in India. The company is offering a wide range of services that include creating educational and training content of global relevance, designing and executing large learning initiatives and setting up the requisite infrastructure. They are the Education Service Providers for several State Governments in India, for their Computer Education, Computer Literacy, Computer Aided Learning and Teachers Training projects. The company is a pioneer in computer education has partnered with various State Governments to bridge the digital divide by setting up computer lab infrastructure at schools and colleges and imparting IT education through well-trained Everonn faculty under their ICT programme.

ICT segment has potential to surprise
Everonn has Point of presence in 4442 schools in ICT. The average revenue per school decline by 41% to Rs1.24 lakh in FY09. No new schools were added during Q4FY09. The company had Bid for 1092 schools in Uttar Pradesh but could not win the order. Everonn added 1278 schools in FY09. The current Order book stands at 130 crore executable over the next five years. The company expects ~35,000 schools are expected to come up for bidding in FY10.

ViTELS segment Vital contribution
The number of schools grew by 209% y-o-y to 557 in FY09. The number of colleges soared by 248% y-o-y to 800 in FY09. ESIL has a point of presence of 1357 currently. The point of presence is expected to double in FY10E. The company Added 37 schools In Q4FY09 and 185 colleges in Q4FY09.

Key Developments
Everonn received a LOI from M S Ramaiah Medical College and Teaching Hospital, Bangalore. As per the LOI, the Company would be installing a studio to facilitate the process of e-learning and for networking their CME programmes to their group of 7 Colleges. These courses will also be taken to other Everonn colleges.

Everonn received Letter of Intent (LOI) from West Bengal University of Technology for implementation of Everonn Learning through VSAT enabled classrooms in 147 colleges in West Bengal. A studio will be set up by Everonn at the West Bengal University campus from where the professors will take classes to students of the various colleges. The classes will be in a live and interactive mode. The Technology setup will also be used for training of Trainers and for imparting Examination inputs. This will increase the student base for Everonn courses by 80,000 plus students.

Valuations
At current price of Rs 286 the stock is trading at P/E of 18.2 x TTM EPS of Rs.15.8 and it is trading at EV/EBITDA of 8.3x. We recommend a “Hold” on the stock with a 12 month target price of Rs312