Jaro Institute Shares Could Rally 65%, Says DRChoksey; Brokerage Initiates Coverage With 'Buy' Rating

Jaro Institute of Technology Management and Research Ltd. shares are up after brokerage firm DRChoksey initiated coverage on the share with a 'Buy' rating and could see 65% upside from the current market.

The brokerage is optimistic about Jaro Institute's long-term growth prospects, in view of the fast growth of online higher education in India as well as supportive government policies, and the company’s scalable, asset-light business model.

65% Upside Potential

Jaro Institute is well-positioned to tap into India's growing demand for online higher education, DR Choksey said.

As the company continues to grow its learner base and build partnerships with other top universities, the brokerage has initiated coverage with a 'Buy' recommendation and is going to yield nearly 65% returns.

The positive outlook is because more online courses and professional upskilling programs are being conducted in the country.

Why DRChoksey Is Bullish

According to the brokerage, there are structural factors that are driving long-term growth in India’s higher education industry.

1. Rising demand for higher education

India still has relatively low higher education penetration compared to many developed countries.

As millions of students and working professionals seek affordable, flexible learning options, online education platforms are seeing strong demand.

2. NEP 2020 Driving Digital Learning

The implementation of the National Education Policy (NEP) 2020 has changed online education’s regulatory regime considerably.

The policy promotes digital learning, multidisciplinary education, and greater accessibility to students and so provides new opportunities for education service providers such as Jaro Institute.

3. Acceptance of online degrees.

The stigma of online education has diminished in recent years.

So companies are paying more attention to online certification, executive programs, and postgraduate degrees - and a lot of that from very good universities.

This trend is expected to expand the addressable market of Jaro Institute in the coming years.

Strong Business Model

DRChoksey highlighted Jaro Institute's asset-light operating model as one of its biggest strengths.

As opposed to spending a lot of money on real campuses, the company partners with universities and educational institutions to market and manage online programs.

This partnership-based model allows the company to:

1. Scale operations efficiently
2. Generate higher margins
3. Reduce capital expenditure
4. Improve return on capital

The brokerage believes that this business structure is very profitable and has big operational leverage as enrollments increase.

Expanding Market Opportunity

India’s online higher education market will grow very rapidly in the next decade.

Several factors are supporting this expansion:

1. Rising internet penetration
2. Affordable smartphones
3. Increasing digital literacy

Working professionals looking for career advancement

1. Government support for digital education
2. Corporate demand for employee upskilling

As these trends continue, education technology companies in higher education are likely to benefit from these trends.

Growth Drivers Ahead

The future growth of Jaro Institute will most likely be supported by:

1. Expansion of university partnerships
2. Launch of new academic programs
3. Increasing enrollments
4. Higher student retention
5. Improved operating efficiencies

Increasing demand for executive education and professional certification courses

Over the near term, these could contribute to stable revenue growth and profitable growth.

Key Risks

Such a positive outlook should be taken into account by investors, however, because of the risks and how these risks are going to come into play.

There is more competition in the online education sector, regulatory changes affecting higher education, dependence on university partnerships, student enrollments varying, and economic slowdown curtailing discretionary spending on education.

Investment Outlook

DRChoksey believes Jaro Institute is entering a good phase as India’s higher education ecosystem undergoes a fast digital transformation.

Thanks to good policy and growth of online learning, and a rise in demand for skill-based education, the brokerage expects that the company will make good long-term structural growth.

If execution continues to be good and enrollment momentum is maintained, Jaro Institute could well become one of the key beneficiaries of online education in India.