What’s Driving Investor Interest in Aptech Ltd (NSE:APTECHT) ? Stock UP 30% in 1 Month.

Aptech started its education and training business in 1986 and has trained millions of students worldwide. Aptech has a presence in more than 40 emerging countries through its two main lines of business – Individual Training and Enterprise Business.

As a leader in career education, it has more than 1,000 training centres worldwide. In one-to-one training, Aptech offers career and professional training through its brands Aptech Computer Education, Arena Animation & Maya Academy of Advanced Cinematics (both in animation and multimedia), Aptech Hardware & Networking Academy, Aptech Aviation & Hospitality Academy and Aptech English Learning Academy . Enterprise business includes content development (Aptech Education Services), training and assessment solutions for businesses and institutions (Aptech Training Solutions, Aptech Assessment and Testing Solutions).

The largest business model for Aptech is the franchise model, and several brands of the Individual Training segment primarily operate under this model. Aptech is also constantly deploying new businesses through initiatives under this model. These brands and initiatives cater to career development needs across different verticals.

Aptech Limited and its subsidiaries are aware of the importance of skill development and recognize that higher education is not enough to meet the industry’s requirements for skilled manpower.

 The company nearly doubled its operating revenue, more than quadrupled its net profit thanks to operating leverage. Operating margin jumped from 2% in FY 2020-21 to 14% in FY 2021-22 and net profit margin from 10% to 21%.

Global Retail segment revenue grew 45% from 8,896 Lakhs to 12,903 Lakhs in FY 2021-22. The performance of the International Retail division was affected by the impact of the COVID-19 pandemic during FY2021-22 in some of its key markets, which were not as affected as in the previous year.

Therefore, the division’s revenue saw a year-on-year growth of only 2.4% in FY 2021-22. In comparison, the Domestic Retail division fared much better due to the muted impact of the pandemic in India for much of FY 2021-22. Operating income of the Domestic Retail division jumped 63.4% to 10,166 Lakhs during FY 2021-22.

The total balance of cash, cash equivalents, short-term investments and financial instruments in the aggregate as of March 31, 2022 jumped to 11,817 lakhs from 8,082 lakhs exactly a year ago.

The company’s total operating revenue on a consolidated basis for the year ended March 31, 2022 stood at Rs 22,610 lakh, an increase of 91.5% over the previous year.

Profit before tax is 3,766.37 lakhs, which increased by 394.7%. Profit after tax for the period rose from 1,226 lakhs in the previous year to 4,944 lakhs, a jump of 303.3%.

ROE and ROCE recovered from 6% each in the previous year to 26% and 21%, respectively.

Debt on the balance sheet continued to be zero. Cash, cash equivalents, short-term investments and investments in financial instruments stood at 11,817 Lakhs as on March 31, 2022.

Effective April 1, 2021, the Company began to gradually transition to the Student Delivery model from the licence fee model for domestic retail centres (excluding preschools).

The Student Delivery model will be applicable for the centre from the date of migration to the Student Delivery model agreed with the Business Partner. In this model, revenue recognition is based on the progress of student services over the duration of the course, gross student fees are reported as revenue and the business partner’s share is reported as an expense.

During the transitional phase, there would be both revenue streams, i.e. licence fees and student delivery revenue. The impact on financial management is limited to accounting for revenues and expenses without a change in cash flows. The entire network of centres would be converted over time from the earlier Royalty model to Aptech’s Student Delivery model.

As on 31 March 2022, the number of centres under the Student Delivery model was 335. The total revenue recognized in FY 2021-22 under the Student Delivery model was 1,926 Lakhs.

The company has increasingly moved towards an asset light franchise model and away from its own centre operations. It has also fine-tuned its franchise model and is now at a stage where this model has evolved into a ‘platform’ on which many new products can now be deployed. A distinct advantage of the Aptech franchise platform is that it is a global and not just a local India-specific platform.

The company has a wealth of experience in IT education and new business strategies and brand launches, an increased focus on international business and a turnaround in domestic business with a renewed focus on franchises and an e-commerce platform will all attract customers. earnings dynamics of Aptech Ltd.

Skill India and Digital India are the two focus areas of the government and the company is well positioned to tap the potential of these two government initiatives.

Domestic retail is the cash cow of a company where capital employed is low and returns are high, and it has lacked growth in the past few years, which now appears to be turning around. Subsidiary investments have yielded a suboptimal return, which has affected the overall performance of the business, but with new business initiatives, things are likely to improve and performance will begin to reflect on the bottom line as well.