Ubhar Cap initiates coverage on Ataa Educational, recommends ‘Accumulate’

Logo of Ataa Educational Co.

Ubhar Capital initiated coverage on Ataa Educational Co., recommending “Accumulate” on the stock with a target price (TP) of SAR 68 a share.

Ataa is a major player in Saudi Arabia’s education sector, operating classes from KG to 12th grade. The company expanded its portfolio by more than 50% from 13 to 20 schools in the last 18 months through acquisitions.

Ataa’s overall capacity also jumped from 40,000 to 60,000 students, Ubhar said in a recent report.

The company’s recent acquisitions took a toll on profitability, as Ataa remained under pressure during the previous financial year ended July 2021, with revenue starting to improve later.

Ubhar expected Ataa to report improved profit over the coming financial year and onwards as the operations smoothen out.

Ataa is well-positioned to benefit from the resumption of the physical classes in schools, and report a higher profit as the pandemic-related discounts are likely to be removed over time.

“We expect the average revenue per student to continue registering a healthy growth rate over the next few quarters, as the full impact of school reopening is yet to get reflected,” Ubhar indicated.

Overall, the average revenue per student is estimated to rise at a compound annual growth rate (CAGR) of 5% over 2021-2028 to reach around SAR 14,000 from nearly SAR 10,000 during 2021.

Ataa’s top-line is also forecast to increase by around 21% YoY, excluding the schools acquired over the last few quarters in 2022.

The company’s net profit is estimated to reach SAR 83.3 million in the fiscal year ending July 2022, and SAR 53.1 million in fiscal year ending July 2023, the brokerage noted.