Buy Navneet Publications; target of Rs 86: Ventura

Ventura report on Navneet Publications:

The numbers for the current quarter were weaker than expectations owing to (a) delay from Maharashtra Board in releasing new Textbooks, (b) marginal presence of government orders and (c) margin impact due to 11% QoQ rise in paper prices, notional forex loss and intense competition in domestic stationery business. We expect this spillover effect to get offset in Q2FY14 as the textbooks in Maharashtra releases into the market. Moreover, meaningful price hikes are expected to offset the decline in margins witnessed during the current quarter.

Further, we would like to revisit FY14 forecasts only after H1FY14 performance (i.e. after Q2FY14 results) as the true picture of performance emerges. We have cautiously not factored ~Rs 750 crore digital learning order received by NPIL from Directorate of Primary Education, Maharashtra owing to the uncertainty in the timing of the order. We continue to remain bullish on the company on the back of multiple growth drivers viz. proposed common curriculum, geographic expansion and improved visibility in e-business and stationery business (exports). At the CMP of Rs 53, NPIL is trading at 10.1x and 8.2x its estimated earnings for FY14 and FY15 and we recommend a BUY on the stock given ~12% decline in last one month with a target of Rs 86 over a period of 18 months.

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