MOSL: NAVNEET EDUCATION (Buy)-Revenue growth shows buoyancy, Margins miss estimates
Navneet Education: Revenue growth shows buoyancy, Margins miss estimates
(neli IN, Mkt Cap USD0.3b, CMP INR112, TP INR156, 40% Upside, Buy)
- Revenues grow 44%; EBIDTA expands 220bp: NELI reported YoY growth of ~44% in revenues to INR2,635m (est. INR2,890m) in 2QFY19, driven by growth in publication and stationery segments. EBITDA margins expanded ~220bp YoY to 17.6% (est. 25%). EBITDA grew 65% YoY to INR463m (est. INR722m). Adjusted PAT stood at INR289m (est. INR452m) in 2QFY19, posting a YoY growth of 74%. For 1HFY19, revenues grew 25% YoY, EBITDA grew 28% YoY and PAT grew 23% YoY. We expect NELI to deliver revenue growth of 6%, EBITDA growth of 9% and PAT growth of 10% in 2HFY19.
- Publishing revenue grew 52% on spillover; stationery revenue jumps 30%: Publishing revenue grew 52% YoY in 2QFY19 (typically a sluggish quarter) driven by spillover of ~INR400m of revenues from 1QFY19; excluding the spillover, the company reported ~18% growth in this segment. The spillover was a result of a delay in government textbook (Balbharti) release in 1QFY19 for standards 1, 8 and 10 where the syllabus had been changed. This resulted in only 10 days of sales during the peak quarter of 1QFY19 for the publishing segment, where NELI typically achieves 90% of its publishing revenues for the year. Stationery revenue jumped 30% YoY primarily driven by rising export orders. Exports accounted for 70% of stationery revenues in 2QFY19. We expect this segment to grow at 28% YoY in FY19.
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.
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