This Publishing Company Declares 130% Dividend, Stock Has A Buy Rating

Leading Indian book publishing company Navneet Education Limited announced a dividend of 130% recently through a securities exchange filing. The company posted healthy growth for the March quarter, and based on it, a leading brokerage firm sees significant growth potential from it.

Q4FY23 Results

The company's consolidated revenue increased 27% YoY to Rs 4,090 million, above the expected figure of Rs 3,522 million. The publishing sales increased 14% YoY to Rs 1,497 million, while stationery sales increased 37% YoY to Rs 2,571 million, stated stock-broker Prabhudas Lilladher.

Also, it was reported that Navneet's gross profit increased 13% YoY to Rs 2,058 million with a gross margin of 50.3%, below the projected margins of 54.3%. Further, it was observed that the consolidated EBITDA declined 5% YoY to Rs 598 million, higher than the estimate of Rs 339 million with a margin of 14.6% higher than the brokerage firm had assumed it to be at 9.6% as compared to a margin of 19.5%/3.9% in 4QFY22/3QFY23 respectively.

While the consolidated PAT for the book publisher was at Rs 229 million, higher than the stock broking firm estimate of Rs 140 million with a margin of 6% vs 9% in 4QFY22.

Valuation & Rating

Prabhudas Lilladher has increased its estimates for FY24E/FY25E EPS by 12%/8% and upgraded the rating from 'Accumulate' to 'Buy'. The reasons for such change in rating are: given re-alignment in growth assumptions for publishing business amid expected fillip in volumes, as students have started returning to private schools from government schools post-COVID, constrained aggression in Ed-Tech business (discontinued a B2C product amid non-viability in operations) and sharp swing in stationary EBIT margin.

The brokerage firm added that the results were above its estimates driven by a sharp recovery in the stationary segment. The turnaround in Indiannica (ILL) business (managed to achieve breakeven in FY23) and the decision to discontinue LeapBridge, a B2C Ed-Tech product, is likely to provide an earnings cushion.

"We expect sales/PAT CAGR of 11%/24% over FY23-FY25E and upgrade to BUY with a target price of Rs 152 after including the per-share value of EdTech/K12 businesses at Rs9/Rs19 respectively," it further said.

Dividend Details

Further, in its board meeting held on May 16, the book publisher recommended a dividend of Rs 2.60 per equity share (130%) on the face value of Rs 2 each for the financial year ending on 31st March 2023.

It is subject to the approval of members at the ensuing annual general meeting. No record date or book closure details were shared by the company.

Scrip Movement

The latest market price of Navneet Education stock is Rs 113.55. It has declined marginally by 0.44% on an intraday basis, at the time of writing this note. In the last one year, the share price rallied by 19.46% and in the past three years, it has grown by 61.18%.

Disclaimer

The stock has been picked up from the brokerage reports of Prabhudas Lilladher. Greynium Information Technologies, the author and the brokerage firms are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.