Prabhudas Lilladher is bullish on Navneet Education has recommended buy rating on the stock with a target price of Rs 142 in its research report dated November 14, 2019.
Prabhudas Lilladher's research report on Navneet Education
Navneet's (NELI) results were above our estimates in a seasonally lean quarter with revenues declining 6.3% YoY to Rs2,468mn (PLe of Rs2,160mn; beat by ~14%). However, after adjusting for the spillover of Rs600mn in 2QFY19, revenues increased 21.3% YoY aided by strong growth in the stationery segment. EBITDA declined 31.4% YoY to Rs318mn and was in-line with our estimate with margins declining 470bps YoY to 12.9%. Tax reversals led to 47% YoY growth in PAT to Rs425mn. Given the current quarter performance, we keep our estimates broadly unchanged. Valuations at 9.6x FY20E and 8.3x FY21E appear attractive given 33% bottom line CAGR over FY19-21E, superior return ratios, strong dividend pay-out and narrowing losses in E-sense.
However, we marginally cut our target multiple to 12x (earlier 15x) as we roll forward to FY21E. Maintain BUY with a TP of Rs142 (earlier Rs153).
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