Reduce Navneet Education; target of Rs 119: Prabhudas Lilladher

Prabhudas Lilladher's research report on Navneet Education

We cut our EPS estimates by ~5% for FY27E/FY28E as we fine-tune our topline growth assumptions for the stationary segment amid ongoing challenges in both domestic & export markets. NELI IN reported a subdued performance in 2QFY26 with revenues declining 9.1% YoY to Rs2,470mn (PLe Rs2,507mn) primarily due to weak export stationery demand given challenging external environment following levy of tariffs by the US. Additionally, lower realizations in the domestic stationery business driven by correction in paper prices, further weighed on revenue. While gross margin improved to 59.1% (PLe 52.0%) aided by softer raw material costs, NELI IN reported a loss of Rs150mn (PLe loss of Rs194) led by weakness in the stationary business.

Outlook

On positive note, the publication segment grew 10.6% YoY, supported by the initial curriculum change in lower grades. We foresee near-term growth challenges and expect sales CAGR of 5% over FY25-28E with EBITDA margin of 16.5%/16.2%/16.9% in FY26E/FY27E/FY28E. Retain REDUCE with a SoTP-based TP of Rs119 (refer Exhibit 5 for more details).

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