Navneet Education - Company Update - ICICI Securities

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 Rs. 207.2 crore (publication: -10% to Rs. 55.9 crore, stationery: -17.5% to Rs. 151.0 crore). According to the management, due to lockdown company, lost revenues worth Rs. 54 crore (publication: Rs. 10 crore, stationery: Rs. 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 Rs. 32.7 crore with margin expansion of 430 bps YoY. PAT for the quarter grew 10% YoY to Rs. 62.0 crore. On the balance sheet front, efficient working capital policy led to a decline in NWC days by ~14 to 155 days. Subsequently, higher generation of CFO led to a decline in borrowings by ~Rs. 100.0 crore (D/E: 0.3x) in FY20.

Valuation & outlook

We cut our revenue, earnings estimates for FY21E by ~26%, 37%, respectively, factoring in Covid-19 disruptions. We introduce FY22E estimates, with revenue, earnings growth of 20%, 46% YoY, respectively. Navneet over the years has maintained b/s prudence having virtually debt free status and generating healthy RoCE of 24%. The stock is available at reasonable valuations trading at 8.4x FY22E EPS. We reiterate BUY rating on the stock with revised TP of Rs. 95 (10.0x FY22E EPS) (previous TP: Rs. 115).

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Navneet_CoUpdate_Jun20.pdf

Shares of Navneet Education Limited was last trading in BSE at Rs.79 as compared to the previous close of Rs. 80.1. The total number of shares traded during the day was 111066 in over 1682 trades.

The stock hit an intraday high of Rs. 82.15 and intraday low of 77.4. The net turnover during the day was Rs. 8885850.

Source : Equity Bulls

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