Buy S Chand and Company; target of Rs 228: Prabhudas Lilladher

Prabhudas Lilladher's research report on S Chand and Company

We increase our FY23E/FY24E/FY25E EPS estimates by 21%/4%/4% respectively as we upgrade our revenue assumptions on the back of strong 9MFY23 performance. Higher EPS swing in FY23E is aided by upward revision in GM estimates amid planned price hike of 20%+ across product portfolio. S Chand & Company (S Chand) reported a decent performance in non-seasonal quarter with revenues of Rs652mn (PLe of Rs601mn) and PAT loss of Rs305mn (PLe loss of Rs309mn) aided by one-off gain of ~Rs75mn from Ineuron’s (EdTech investment) exit.

Outlook

We expect sales/PAT CAGR of 8%/38% over FY23E-FY25E and maintain BUY on the stock with a revised TP of Rs228 (12x Sep-24 EPS). As NCF for K-2 classes (forms ~15-20% of school education’s top-line) has been announced in October 2022, it paves the way for subsequent announcements for higher grades in near future (2Q or 3Q of next financial year) and would act as a key growth lever, in long term. S Chand trades at 10x/9x our FY24E/FY25E EPS and valuations are undemanding for a business that commands FCFF yield of ~14-18% over FY23-FY25E. We retain BUY and S Chand remains our preferred pick in the education space.

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