Accumulate Navneet Education; target of Rs 167: Prabhudas Lilladher

Prabhudas Lilladher's research report on Navneet Education

We cut our EPS estimates by 3%/5% for FY25E/FY26E and downgrade the stock to ‘ACCUMULATE’ given near term growth challenges in publishing division amid delay in NEP implementation. NELI reported strong operational performance with EBITDA margin of 19.9% (PLe 15.7%) given margin recovery in publishing division but near term outlook is bleak amid status quo in syllabus schedule for FY25E. Nonetheless, we expect stationary division to grow at 12% CAGR over next 2 years as new designs launched in paper segment have received good response while there are plans to introduce non-paper based products in near future.

Outlook

Overall, we expect sales/PAT CAGR of 11%/14% over FY24-FY26E and downgrade to ‘ACCUMULATE’ with revised SOTP based TP of Rs167 (earlier Rs 182). We have eliminated illiquidity discount factor from our K12 valuation post recent stake sale and have discontinued valuing EdTech piece separately amid demerger of Navneet FutureTech into parent.