MOSL: NAVNEET EDUCATION (Buy)-In-line performance led by stationary/publication sales
NAVNEET EDUCATION: In-line performance led by stationary/publication sales
(NELI IN, Mkt Cap USD0.3b, CMP INR106, TP INR135, 28% Upside, Buy)
- Healthy overall performance; PAT grows 17%: 1QFY20 revenue grew 19% YoY to INR7,950m (v/s est. INR7,705m), primarily driven by 18%/19% YoY growth in stationery/publication revenues. EBITDA rose 17% YoY to INR2,314m (v/s est. INR2,250m), with margin contraction of 30bp YoY to 29% (in-line). Adj. PAT grew 17% YoY to INR1,474m (v/s est. INR1,454m).
- Publication revenues up healthy 18%; exports drive stationery growth: Publication revenues grew 18% YoY to INR4,322m, while EBIT margins contracted 400bp YoY to 38% in 1QFY20. Stationery revenues grew a robust 19% YoY to INR3,625m, primarily driven by exports, which were up 27% YoY. Domestic stationery sales grew 6% YoY. Stationery EBIT margins expanded 400bp YoY to 22% in 1QFY20.
- Indiannica improves, K-12 PAT accretive, E-Sense finding its feet: Indiannica reported revenues of INR72.9m (v/s INR70.5m in 1QFY19) and loss of INR78m (down from INR88m in 1QFY19). K-12 contributed INR55m to 1QFY20 PAT. E-Sense reported revenues of INR90.7m (v/s INR96.4m in 1QFY19) and PAT of INR108m (v/s INR413m in 1QFY19).
- Valuation view: We maintain our estimates for FY20/FY21 and expect NELI to deliver sales/PAT CAGR of 14%/20% over FY19-21E. About 50% of our projected FY20 revenue estimate of INR16b has been achieved in 1QFY20 driven by (publication business) change in the Gujarat Board syllabus. We continue to value the stock at 14x FY21E EPS with target price of INR135/share and maintain Buy rating.
Navneet Education Limited, formerly Navneet Publication (India) Limited, is engaged in the business of publication of education and non-education books, and manufacture of paper and non-paper stationery products. The Company's segments include Publication, Stationery and Others. Its geographical segments include North & Central America, Africa, Europe, Australia & Oceania, Rest of the World and India. It has published over 5,000 titles in English, Gujarati, Hindi, Marathi, Tamil, Urdu, and other Indian and Foreign Languages. The Company sells its products under various brands, including Navneet, Vikas, Gala, Grafalco, FfUuNn and Boss. It also publishes various titles in the Children and General books category, which are not based on syllabus, such as coloring and activity books, board books, story books, and books on health and hygiene, art and artist, cooking, mehendi and embroidery, among others. It has manufacturing facilities in Virar (near Mumbai), Guma, Dantali and Silvassa.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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