Buy Navneet Publications; target Rs 78: ICICIdirect.com

ICICIdirect.com's report on Navneet Publications

"Navneet Publications' (Navneet) Q1FY14 results were marginally lower than our estimates on the topline front while the operating margin and PAT were significantly lower than our estimates. Q1FY14 sales, EBITDA and PAT stood at Rs 395.4 crore (up 10.5 percent YoY, I-direct estimate: Rs 425.0 crore), Rs 116.18 crore (up 2.0 percent YoY, I-direct estimate: Rs 135.0 crore) and Rs 71.0 crore (down 1.1 percent YoY, I-direct estimate: Rs 84.9 crore), respectively. The publication segment growth was lower than our expectation owing to a delay in receipt of changed syllabus textbooks from the government. The management said the full impact of the syllabus change will be visible in Q2FY14. Owing to further delay and uncertainty of government orders, we have revised our FY14 and FY15 earnings estimates downwards by 12 percent and 11 percent, respectively. As we rollover to FY15 for valuation purpose, we maintain our BUY rating with a target price of Rs 78 (based on 13.0x FY15E EPS). The recent correction in the stock can be used for fresh buying.

"We continue to remain positive on Navneet owing to its consistent topline growth, negligible debt, strong return ratios and consistent dividend payout. While this quarter's performance has been lower than our estimates, we remain hopeful of a recovery in Q2FY14 owing to the spill-over effect of Q1FY14. We reiterate our BUY rating on Navneet Publications with a target price of Rs 78 (based on 13.0x FY15E EPS)," says ICICIdirect.com research report.

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