MOSL: NAVNEET EDUCATION (Buy)-Results exceed estimates-Exports to drive growth
​Navneet Education: Results exceed estimates; Exports to drive growth
(NELI IN, Mkt Cap USD0.6b, CMP INR176, TP INR226, 29% Upside, Buy)
- EBITDA, PAT beat estimates: NELI’s overall revenue rose 12% to INR2,098m (est. of INR2,026m) in 4QFY17 from INR1,875m in the year-ago period, as Stationery business grew ~21%. EBITDA grew 12% YoY from INR249m to INR279m (est. INR243m), with the margin remaining flat at 13.3% (est. of 12%). Consequently, adj. PAT grew 80% YoY from INR94m to INR169m (est. of INR130m). Consolidated results include subsidiary Indiannica’s (Britannica) revenue of INR633m and PBT of INR254m only of 4Q. For FY17, revenue grew by 24% to INR11.8b, EBITDA margin by 210bp to 23.8% and PAT by 51% to INR1,811m.
- Publication and Stationery deliver healthy growth: In FY17, Publication revenue grew by 15% to INR5,959m and Stationery revenue by 20% to INR49,332m. Publication revenue includes export sales of INR226m (up 118%) and government sales of INR119m. Within Stationary, exports grew 34% to INR2,314m. EBITDA margin in Publication stood at 38% and in Stationary at 13%. EBITDA grew 18.6% in Publication and 47% in Stationary.
- Management expects strong growth, margin expansion: With syllabus change in Maharashtra/Gujarat, growth should be strong in Publication in FY18 and FY19. On account of strong order book and visibility, Stationary is expected to deliver 20%+ growth, mainly driven by exports. Exports are expected to remain strong through the year and not just during the ‘back to school’ period. Since margin in exports (16%) is higher than that in domestic business (12%), overall margins are expected to expand. NELI also plans to hike prices by 5-5.5% to counter cost inflation.
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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