S Chand & Company Ltd. share price target

SCHAND reported an in-line operating performance with EBITDA margin of 43.1% (PLe 42.2%) while there was a narrow miss at bottom-line level due to higher-than-expected tax rate of 26.7% (PLe 21.9%) amid non-recognition of DTAs in subsidiaries. Management expects revenues to surpass Rs8,000mn with EBITDA margin of ~18-20% in FY26E led by 1) 5-7% increase in volumes as NCERT is expected to announce new syllabus books for grades 4,5,7&8, 2) multiple content syndication deals and 3) single digit price hike across product...

~5-10% price hike to be implemented across product portfolio. S Chand's 1Q performance was impacted by delay in the start of academic session amid emergence of 2nd wave. As most states are eyeing a staggered re-opening around August/Sep, some revenue spill-over is expected in subsequent quarters. If the upcoming sales season is not impacted by 3 rd wave, revenue can be in the region of Rs5bn in FY22 aided by price hike of ~5-10%. After having managed a successful turnaround in FY21 (break-even...

(minor loss of Rs65mn) backed by successful implementation of S Chand 3.0 plan that focused on cost rationalization & improvement in working capital. While S Chand's results were below our estimates, BS & NWC metrics days in FY20) while net debt reduced to Rs1.2bn (Rs1.8bn in FY20). After...

We cut our EPS estimates by 22% for FY21E as schools for K1-K5 (contributes ~30% to sales) have still not opened in most states. While management sounded confident that an announcement is expected soon given CBSE/ICSE boards have come out with circulars directing schools to start the new academic year on schedule we choose to remain conservative. Nonetheless, given that the next academic year can just get delayed but may not result in complete loss of business (spill-over of revenues can happen...

S Chand's operating performance (EBITDA loss of Rs363mn) was in-line with our estimate of Rs374mn in a non-seasonal quarter due to stringent cost control. Management indicated that schools will re-open from November onwards in a phased manner and has lined up aggressive expansion plans in the Ed-Tech space. For Mylestone, a digital offering of S Chand, the target is...

S Chand's operating performance (EBITDA loss of Rs363mn) was in-line with our estimate of Rs374mn in a non-seasonal quarter due to stringent cost control. Management indicated that schools will re-open from November onwards in a phased manner and has lined up aggressive expansion plans in the Ed-Tech space. For Mylestone, a digital offering of S Chand, the target is...

If National Curriculum Framework (NCF) is released by April-May 2021, full blown impact will percolate into financials from FY22E. We upgrade S Chand from ACCUMULATE to BUY by raising our target P/E multiple to 5.5x (3.5x earlier) as 1) maiden EBITDA profit of Rs19mn (PLe loss of Rs230mn) in a non-seasonal quarter indicates that cost rationalization program is on track (opex cost was down 26.3% YoY; a reduction of ~15-20% is envisaged in FY21E) 2) focus on working capital efficiency is clearly...

rationalization by 10-20% to result in cost savings in FY21. COVID-19 led to a revenue loss/spillover of Rs1.6-1.8bn. While cost generation at Rs486mn was below expectations of Rs1.2bn as lockdown impacted collection efforts and led to inventory pile up. Given the uncertain timeline regarding start of the upcoming academic year, full recovery of...

seasonally lean quarter. Improvement in collection efficiency and focus on working capital management has led to a reduction of 90 days in receivable cycle and 37 days in working capital cycle (highest ever reduction seen in the last 4 years). We believe S Chand 3.0 program aimed at improving the working capital efficiency (engaging with quality channel partners, lowering inventory levels & improving the collection cycle) & lowering operating costs (rationalization of employee & other cost heads) has started yielding results. In addition, New Education Policy (draft already announced in May 2019) will...

We cut our revenue/PAT estimates by 32%/45% for FY20 and 27%/31% for FY21 given unrelenting focus on FCFF generation by engaging with quality channel partners. Though channel cleansing is expected to eliminate dealers/distributors with elongated payment cycle we believe realigning credit terms is a long drawn process and growth could suffer in the interim. While New Education Policy can act as a growth kicker (2 nd hand books go out of the system) given the uncertainty in time-line we remain apprehensive of any immediate benefits. We believe S Chand 3.0 program aimed at...

Rs28mn/Rs46mn respectively as the process of improving credit terms with channel partners led to unexpected sales return (Rs350mn) coupled with postponement of certain schemes/discounts to 4QFY19 (partial revenue spillover expected). Standalone/consolidated EBITDA losses stood at Rs277mn/Rs852mn. Locking in paper prices at 5-6% higher vis--vis an increase of 15-16% witnessed in the market partially curbed EBITDA losses....