Navneet Education Ltd. share price target

Export enquiries are strong and schools have opened in most states. & stationary sales. With schools having started to re-open gradually, we anticipate a normal sales season for FY23. As last academic cycle was disrupted because of COVID, usage of 2nd hand books can be lower which can act as additional growth lever. Given proliferation in online learning, NELI has intensified its focus on EdTech. Apart from investing Rs750mn in SFA, a...

Over the years, the company has built a strong brand in the educational content & scholastic stationery In the state boards of Maharashtra and Gujarat, the company has a market...

Focus on scaling Ed-Tech is clearly evident. & stationary sales amid staggered re-opening of higher grades (8-12th) due to declining COVID cases. Management hinted that publishing & stationary revenue will be better than FY21 and can breach pre-COVID levels in FY23. NELI has lined up aggressive expansion plans in the Ed-Tech space with a...

Navneet reported mixed Q4FY20 results wherein revenues were impacted by Covid-19 disruptions while better gross margins supported PAT growth. Revenue for the quarter declined 15.6% YoY to | 207.2 crore (publication: 10% to | 55.9 crore, stationery: -17.5% to | 151.0 crore). According to the management, due to lockdown company, lost revenues worth | 54 crore (publication: | 10 crore, stationery: | 44 crore). Gross margins improved substantially by 950 bps YoY to 61.6% owing to benefits of a decline in paper prices (~600 bps) and favourable product mix for stationery exports. EBITDA grew 16% YoY to | 32.7 crore with margin expansion of 430 bps...

We cut our sales/PAT estimates by 7.7%/6.0% for FY21E as 1) in a truncated academic year, recouping the entire lost sales of 1Q (strongest quarter) can be a challenge 2) domestic stationary business is expected to suffer due to delay in opening of schools 3) exports stationary business has witnessed some order cancellations and revenue is expected to be flat and 4) ILL business can face growth headwinds as penetrating newer schools can get difficult in such an environment. However, our FY22E estimates are more or less unchanged as we expect normalcy to resume by next academic cycle....

With limited changes in the FY21 syllabus for Maharashtra, the outlook for the publication segment stays subdued in the near term. The company is seeking acquisition opportunities to enhance its geographical reach to other states (with acquisition size of ~| 100 crore). The management expects Indiannica (recent acquisition in CBSE curriculum) to achieve breakeven in FY20E (vs. EBITDA loss of | 19.7 crore in FY19) owing to introduction of new workbooks, content, reduction in fixed overheads, enhanced marketing spends. We build in revenue CAGR of 13% in FY19-21E, driven by 5%, 23%...

Healthy overall performance; PAT grows 17%: 1QFY20 revenue grew 19% YoY to INR7,950m (v/s est. INR7,705m), primarily driven by 18%/19% YoY growth in stationery/publication revenues. EBITDA rose 17% YoY to INR2,314m (v/s est. INR2,250m), with margin contraction of 30bp YoY to 29% (in-line). Adj. PAT grew 17% YoY to INR1,474m (v/s est. INR1,454m). Publication revenues up healthy 18%; exports drive stationery growth: Publication revenues grew 18% YoY to INR4,322m, while EBIT margins contracted 400bp YoY to 38% in 1QFY20. Stationery revenues grew a robust...

Strong quarter for publication segment albeit on low base Navneet reported steady revenue growth in the publication segment in its critical quarter (~55% of revenues derived in Q1). Revenue grew 18% YoY to | 432.2 crore, albeit on low base of Q1FY19 (previous quarter disrupted owing to licencing issues). We believe syllabus change in Gujarat (across all standards) and Maharashtra (II, III, XI standards) were key drivers for revenue growth. We expect revenue growth for the publication segment to taper down in Q2FY20, on the back of very strong base (52% growth in...

Syllabus change aids revenue growth for publication segment After subdued growth in FY18 (5.7% YoY), the publication segment exited FY19 with healthy topline growth of 13.1% YoY to | 710.8 crore. There was a revival in revenue owing to syllabus change in Maharashtra for academic year 2018-19 (for I/VIII/X standards). For FY20, we expect revenues to increase ~11% on syllabus change in Gujarat (across all standards). We model in 10% revenue CAGR for the publication segment (excluding Indiannica) in FY19-21E. Scaling-up of Indiannica (the company's recent...

grew 20%/22%/20% to INR14.4b/ INR2.7b/INR1.5b. Overall, EBITDA margins expanded 20bp to 18.7%. Stationery business grew 16%, K-12 turns profitable: Stationery revenue grew 16% to INR1,829m, driven mainly by exports, which were up 27% YoY to INR1,130m. Domestic stationery business declined 1% to INR700m. 4QFY19 being a seasonally slow quarter for the Publishing business, revenue was up 14% YoY to INR622m. K-12, NELI's associate company, turned profitable in FY19, contributing INR56m (NELI's share...

Paper prices have increased by ~7% YoY in FY19. Debt increased to Rs3,370mn in FY19 amid inventory pile-up in light of rising paper prices. Navneet's (NELI) 4QFY19 results were in-line with our estimates in a seasonally lean quarter with revenues of Rs2,455mn (up 15.5% YoY), EBITDA...

EBITDA declined 23% YoY to INR157m (our Net sales grew 21% YoY to INR11,150m, EBITDA increased 23% YoY to INR2,594m and PAT grew 18% YoY to INR1,628m. We raise our FY20/21 PAT estimate by 13%/12% with the K-12 business (Orchids The International School) turning profitable it is expected to be PAT-accretive FY19 onward. We expect NELI to deliver sales/PAT CAGR of 14%/17% over FY19-21 and value the stock at 14x FY21E EPS with a target price at INR159. Maintain Navneet Education NELI has invested in a school management company, which manages 19 CBSE schools under the brand Orchids The International School. Orchids The International School is now an established player in the direct education business. Its occupancy is expected to inch up to 75-80% by Mar19, resulting in PAT accretion of ~INR100m for NELI (35% NELIs share). The company further plans to expand schools under its management.

Navneet reported a dismal set of Q3FY19 numbers wherein results were below our estimates across all parameters Revenue for the quarter grew moderately by 4.1% YoY to | 181.6 crore (I-direct estimate: | 200 crore). On the segmental front, revenues from publishing segment grew by 22% YoY to | 103.1...