ICICI Direct is bullish on Navneet Education has recommended buy rating on the stock with a target price of Rs 95 in its research report dated June 15, 2020.
ICICI Direct's research report on Navneet Education
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.
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 Rs95 (10.0x FY22E EPS) (previous TP: Rs 115).
For all recommendations report, click here
Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.