Hold Navneet Education; target of Rs 150: Prabhudas Lilladher

Prabhudas Lilladher's research report on Navneet Education

NELI reported strong performance in 3QFY25 with EBITDA margin of 6.3% (PLe 3.1%) aided by an institutional order of Rs150mn in publication segment. PAT was buoyed by an FV gain of Rs255mn arising from revaluation of K-12 business. Adjusting for this exceptional gain, bottom-line was in red at Rs97mn. Of late, the publishing division has been facing considerable growth challenges due to increasing usage of second hand books. While institutional orders are likely to be a recurring phenomenon providing the much-needed growth cushion temporarily, we believe material growth kicker would accrue only after higher grades witness a syllabus change. In addition, declining ASP in the domestic stationery market indicates rising competitive pressure, while slow offtake in channel inventory is a reflection of weak demand environment.

Outlook

We keep our estimates broadly unchanged and expect sales/PAT CAGR of 11%/17% over FY25E-FY27E. Retain ‘HOLD’ with revised SOTP-based TP of Rs150 as we roll-forward our valuation to FY27E (refer Exhibit 5 for more details).