Tree House Education & Accessories (THEAL) 2QFY2016 results underperformed our estimates on all parameters. The top-line growth was decent mainly due to strong addition of 73 new pre-schools. On the operating profit front, the company reported flattish growth yoy which resulted into lower growth in profitability. Top-line grew ~15% yoy: The companys top-line grew ~15% yoy to ~Rs57cr, mainly due to growth in existing pre-schools and addition of new pre-schools. The company added 73 pre-schools in various cities like Ahmednagar, Goa, Gurgaon, Jalgaon, Noida, and Ratnagiri, during the quarter. Poor operating performance drags down Net profit growth: The operating profit came in at ~Rs30cr, up ~2% yoy. However, operating margins contracted by 700bp yoy to 52.7%, as the company opened 73 new centres during the quarter, which is the highest ever in the history of the company in a single quarter. The reported net profit grew by only ~1% yoy to ~Rs13cr, due to the poor operating performance. Outlook and Valuation: We continue to remain positive on the stock, as we believe THEAL will continue to register robust growth going ahead. The growth would come on the back of consistent expansion of pre-schools and repayment of debt which would boost...