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Research
Navneet Publications - Earnings accretion to continue - ElaraCapital
Posted On : 2013-06-04 20:45:36( TIMEZONE : IST )
PAT doubles on 40% revenue growth, 450 bps margin expansion
Navneet reported a strong quarter with revenues of INR1.67bn, 40% growth (yoy) vs 20% our expectation. Both publication and stationary led robust 48% and 42% growth respectively. The ongoing syllabus change in Maharashtra and Gujarat State level curriculum has driven publication growth while steady export order pipeline continue to drive stationary biz. EBITDA margin expanded 450bps yoy, to16.7% (though 60bps below estimates) doubling EBITDA to INR278mn, due to healthy stationary margins and operating leverage in publication.
E-learning doubles, offers huge growth prospects
The E-learning division doubled to 1645 enrolled schools, 9500 class rooms with INR150mn revenue and EBITDA breakeven. For FY14E, management guides doubling of revenues and PAT of over INR100mn. With scope of over 12,000 schools, management expects to reach INR1bn revenues in 3-4 years, operating at a stable margin of 30-32%.
Publication and stationary revenues to drive 20% revenue growth
The publication revenues are expected to grow over 25%, led by the ongoing syllabus change and healthy government orders. The stationary revenues should grow at 13% on the back of 20% growth guidance in exports (one-third of stationary) backed by confirm orders. With 20% revenue growth and 30bps margin improvement, PAT should grow 23% for FY14/15E respectively.
Stock languishes despite 33% PAT growth; reiterate Buy
The stock is languishing at current prices for last two years, despite 42% growth over same period, led by steady topline growth. At current prices, stock is trading at below 11x/9x P/E on FY14E/FY15E respectively. Historically, the stock has commanded 14-16x one year forward earnings multiple. We have rolled over valuations, assigning 11x on FY15E EPS of INR7.1, reiterating target price of INR80, and Buy recommendation, offering 36% upside from current levels. Strong cash flows, over 30% ROCE and high competitive intensity, should garner better valuation.
