Recommendation: Buy
CMP = Rs 66.5 (at the time of this recommendation)
Price target: Rs 80
Key points:
- The net sales of Navneet Publications Ltd (NPL) for Q4FY08 grew by a robust 29.5% yoy to Rs 59.1 crore. The sales growth was on account of hefty growth in publication and stationery businesses. The publication business witnessed a robust growth of 28.5% yoy to Rs 21.8 crore. The stationery business achieved a healthy growth of 33.8% yoy to Rs 38.0 crore, mainly on account of good domestic demand and introduction of non-paper stationery products.
- The operating profit margin declined by 102 basis points to 9.0%, mainly on account of a higher other expenditure. An additional promotional expenditure of Rs 1.5 crore towards the stationery business led to a steep hike of 47% in the other expenditure to Rs 15.9 crore. The other income for Q4FY08 stood at Rs 1.0 crore as compared to Rs 0.5 crore during Q4FY07. A higher other income coupled with a lower incidence of tax led to a 57.1% growth in the reported net profit to Rs 2.1 crore.
- Going forward the publication segment, one of the major revenue contributors for NPL, will achieve a moderate growth, as in FY2009 revision of syllabus is due only for a few standards in the states of Gujarat and
- At the current market price of Rs 66.5, the stock is trading at 8.8X its 2010 estimated EPS and at an enterprise value /earnings before interest, depreciation, tax and amortisation of 5.7X.
- I maintain a strong Buy recommendation with a price target of Rs 80 over next 6 months.
