Navneet Education Ltd. INDUSTRY Printing and Publishing No. of Shares (Crore) 23.36 Face value (Rs) 2 Mkt. Cap (Rs. Crore) 3936.62 Price (22/09/2017) 168.25 Book Value (Rs) 29.71 P/BV 5.67 BSE Code 508989 NSE Code NAVNETEDUL Bloomberg NELI IN Reuters NAVN.BO Avg. Monthly Volume 56800 52 W H/L (Rs) 193.50/93 Shareholding Pattern % Indian Promoters 61.78 Foreign Promoters 0.00 DIIs 15.79 FPIs 5.72 Body Corporate 2.13 Non-Institutions 14.58 Total 100 (As on June 30, 2017) Recommendation BUY Company Background Navneet Education Limited (NEL) is one of the largest paper stationery brands in India founded by the Gala Family. It is in the business of Educational, Children and General books Publication, Scholastic Paper and Non-Paper Stationery products. Navneet Education derives 54% of its revenue from publishing and 44% from stationery. Navneet holds around 65% market share in Maharashtra and Gujarat. Presently it holds more than 500 Stock Keeping Units with premier stationary market in USA, Africa, Europe and Middle East. Its stationary manufacturing plant is located at Vasai, Silvassa and Daman and publishing plant is located at Dantali and Santej. Investment Rationale Navneet recently acquired Encyclopaedia Britannica (India) Pvt. Ltd. now renamed into Indiannica Learning Pvt. Ltd., enables it to diversify its geographical reach and make it a pan- India player. The company will market Britannica s existing India specific curriculum titles such as Know for Sure and The English Channel and also publish text books for the CBSE board which will help in expanding Navneet s curriculum. Indiannica plans to add 3 new series of 24 titles, which will boost the current library and help the company to venture into newer geographies. National Council of Educational Research and Training (NCERT) have updated its syllabus and even recent change in the state board syllabus in Gujarat and Maharashtra for major classes will have significant growth opportunity. NEL is also well placed to capture growth triggers like common curriculum across India, and conversion of SEB schools to CBSE. NEL through its digital subsidiary esense provides elearning solutions to schools and students in India and thus integrates technology with learning. Its digital segment through its classroom teaching tool models and management focus on B2B model is likely to provide sustainable growth. Government initiatives and increase in spending towards education will result in increased business opportunity for the company. Export sales in stationary segment is expected to grow which will help to have more predictability of business. Company s standalone revenue for the quarter remained constant at Rs. 565 crore as against Rs. 560 crore in corresponding quarter of last year and PAT for the quarter came in at Rs. 110 crore, YOY decline of 3.4%. Its consolidated topline and bottomline grew at a CAGR of ~9.85 % and ~12.45 % respectively. In FY17, its EBIDT and Net Profit margin improved to 23% and 14 % respectively. The company is on the right track to reap the benefits of changing syllabus, common curriculum across India, and conversion of SEB schools to CBSE. Moreover growth opportunities in exports and the elearning platform are additional triggers. The current valuation of 15 times FY19 earnings looks attractive. We recommend a BUY on the stock with a Price Target of Rs. 213 (19 x FY19 EPS) with an upside potential of ~27% from the current level with an investment horizon of 12 months. Particulars (Rs. Crs) Q1FY18 Q1FY17 Var % FY13 FY14 FY15 FY16 FY17 Net Sales 565.20 560.17 0.90 818.34 896.35 993.88 961.93 1,191.62 PBIDT (Excl OI) 162.39 174.90-7.15 192.21 209.78 238.50 202.81 274.80 Profit After Tax 109.65 113.56-3.44 106.69 115.15 130.34 107.49 170.61 PBIDTM (Excl OI) 28.73% 31.22% -7.98 23.49% 23.40% 24.00% 21.08% 23.06% PATM 19.40% 20.27% -4.30 13.04% 12.85% 13.11% 11.17% 14.32% EPS (Rs.) 4.70 4.77-1.47 4.48 4.83 5.47 4.51 7.31 ^Q1 numbers are standalone and annual numbers are consolidated 1
Company Profile Since 1959, Navneet has been a major force in the dissemination of knowledge and in the field of publishing with more than 5,000 titles in English, Gujarati, Hindi, Marathi, Tamil, Urdu and other Indian and Foreign Languages. The company markets its products under the brands namely Navneet, Vikas, Gala, Grafalco, Boss, YOUVA, TOP Class & TOP Scorer. Navneet s educational syllabus based supplementary books are Digests (Guide), Workbooks, and 21 Most Likely Question Sets. 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 & hygiene, art & artist, cooking, mehendi, embroidery etc. Under the brand of YOUVA, Navneet provides with extensive range of note-books, drawing books, pencils, colour pencils, wax crayons, sharpeners, erasers, geometry boxes, glue and clay. Navneet Business Snapshot Financials 2
Standalone(Value in Rs. Crs) Q1FY18 Q1FY17 Var % FY17 FY16 Var % Net Sales 565.20 560.17 0.90 1,107.35 942.15 17.53 Total Expenditure 402.81 385.27 4.55 855.63 738.75 15.82 PBIDT (Excl OI) 162.39 174.90-7.15 251.72 203.40 23.76 Other Income 12.28 7.62 61.15 23.91 23.70 0.89 Operating Profit 174.67 182.52-4.30 275.63 227.10 21.37 Interest 2.57 2.25 14.22 4.66 4.48 4.02 PBDT 172.10 180.27-4.53 270.97 222.62 21.72 Depreciation 5.30 6.00-11.67 24.99 26.77-6.65 Tax 57.15 60.71-5.86 84.35 69.71 21.00 Profit After Tax 109.65 113.56-3.44 161.63 126.14 28.14 EPS (Rs.) 4.70 4.77-1.47 6.92 5.30 30.69 Consolidated Income Statement (Value in Rs. Crs) FY13 FY14 FY15 FY16 FY17 Net Sales 818.34 896.35 993.88 961.93 1191.62 Total Expenditure 626.13 686.57 755.38 759.12 916.82 PBIDT (Excl OI) 192.21 209.78 238.50 202.81 274.80 Other Income 5.56 3.51 3.14 21.30 22.83 Operating Profit 197.77 213.29 241.64 224.11 297.63 Interest 10.68 11.78 11.24 4.57 5.51 PBDT 187.09 201.51 230.40 219.54 292.12 Depreciation 23.45 25.80 30.76 29.66 28.35 Tax 55.01 60.49 69.25 69.72 82.69 Profit After Tax 108.63 115.22 130.39 120.16 181.08 Minority Interest -0.63-0.01-0.01 0.00 0.00 Share of Associate 0-0.06 0.00-12.67-10.47 Other Consolidated Items -1.31 0.00-0.04 0.00 0.00 Consolidated Net Profit 106.69 115.15 130.34 107.49 170.61 EPS (Rs.) 4.48 4.83 5.47 4.51 7.31 3
Consolidated Balance Sheet (Value in Rs. Crs) Description FY13 FY14 FY15 FY16 FY17 EQUITY AND LIABILITIES Share Capital 47.98 47.98 47.64 47.64 46.71 Total Reserves 371.19 430.67 495.61 535.44 647.11 Shareholder's Funds 419.17 478.65 543.25 583.08 693.82 Minority Interest 0.07 0.06 0.05 0.05 0.05 Long-Term Borrowings Secured Loans 2.42 - - - 0.37 Unsecured Loans - - - - 0.22 Deferred Tax Assets / Liabilities 4.84 5.89 4.05 4.10-0.10 Long Term Provisions 3.88 3.61 5.04 9.18 14.75 Total Non-Current Liabilities 11.14 9.50 9.09 13.28 15.24 Current Liabilities Trade Payables 25.49 21.48 18.14 29.71 75.96 Other Current Liabilities 37.87 44.92 40.45 38.55 53.89 Short Term Borrowings 161.44 231.56 143.58 103.45 158.81 Short Term Provisions 53.86 57.43 68.06 1.32 22.95 Total Current Liabilities 278.66 355.39 270.23 173.03 311.61 Total Liabilities 709.04 843.60 822.62 769.44 1020.72 ASSETS Non-Current Assets Gross Block 331.57 365.20 374.11 386.37 471.74 Less: Accumulated Depreciation 157.42 177.76 204.19 222.78 239.67 Net Block 174.15 187.44 169.92 163.59 232.07 Capital Work in Progress 5.70 4.51 4.00 0.83 2.76 Intangible assets under development 0.03 - - - - Non Current Investments 31.00 47.46 49.23 49.44 44.69 Long Term Loans & Advances 18.06 19.17 17.08 16.19 14.07 Other Non Current Assets 0.93 0.95 1.64 2.02 2.77 Total Non-Current Assets 229.87 259.53 241.87 232.07 296.36 Current Assets Loans & Advances Inventories 275.15 333.69 348.36 307.43 384.28 Sundry Debtors 165.93 196.11 188.56 186.76 278.12 Cash and Bank 3.52 6.92 5.51 5.92 9.72 Other Current Assets 8.00 11.65 10.93 11.17 12.78 Short Term Loans and Advances 26.57 35.70 27.39 26.09 39.46 Total Current Assets 479.17 584.07 580.75 537.37 724.36 Net Current Assets (Including Current Investments) 200.51 228.68 310.52 364.34 412.75 Total Current Assets Excluding Current Investments 479.17 584.07 580.75 537.37 724.36 Total Assets 709.04 843.60 822.62 769.44 1020.72 4
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