MOSL: NAVNEET EDUCATION (Upgrade to Buy)-In-line performance; improved visibility
Navneet Education: In-line performance; improved visibility; Upgrade to Buy
(NELI IN, Mkt Cap USD0.4b, CMP INR120, TP INR160, 33% Upside, Upgrade to Buy)
- Revenue up 19%, EBIDTA expands 75bp: Standalone revenue grew 19% YoY to INR6,700m (est. of INR6,453m) in 1QFY19, primarily driven by 58% YoY growth in Stationery revenue. EBITDA rose 22% YoY to INR1,974m (est. of INR1,916m), with the margin expanding 75bp YoY to 29.5% (est. of 30%). Adj. PAT grew 15% YoY to INR1,263m (est. of INR1,245m). PAT margin was flat YoY at 19% (in-line).
- Publishing revenue marred by delay in textbook release…: Publishing revenue declined 2% YoY, primarily on account of a delay in government textbook (Balbharti) release (based on which the supplementary material is created) for standards 1, 8 and 10, where syllabus was changed. The delay was due to the introduction of a new policy on licensee fee, which was announced only on 21st June 2018. Consequently, we expect a spillover of ~INR600-700m of revenue to 2QFY19. Moreover, Publishing business visibility has improved further for FY20 based on syllabus change in Gujarat. We expect Publishing business to grow by 12% in FY19 and 9% in FY20.
- …impact of which was offset by robust pick-up in Stationery biz: Stationery revenue grew by a robust 58% YoY, primarily driven by high-margin exports. In the domestic market, NELI aims to focus on improving profitability with higher emphasis on premium products, where it has a brand called ‘Youva’. This will allow NELI to set itself apart from other players in the mid-premium and economy segments. We expect this segment to grow at 23% in FY19 and 7% in FY20.
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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