In the last one year, Navneet Publications is one stock, which has underperformed the benchmark index. This is evident from the fact that Rs 100 invested in the stock would have yielded Rs 160 to date as compared to the Rs 180 returned by BSE-Sensex. In this article, we look at the profile of the company in brief.
Navneet is one of India's two listed publishers (Macmillan is the other) and is a leading player in publishing study guides, workbooks and questions sets for students. An increasing portion of the company's revenues also accrues from children's books.
The company's revenues come primarily from two divisions - Publications and Stationery. The former contributed 56% of the total revenues (ending March 2003). It publishes over 3,500 titles every year in English, Hindi, Gujarati and Marathi.
Navneet has a near regional monopoly in the states of Maharashtra and Gujarat where the company continues to enjoy over 50% market share. Its brands 'Navneet' in Maharashtra and 'Gala' in Gujarat have been in existence for over 3 decades. Even the relatively newer brand, 'Vikas' (for children's books), is now a decade old. Competition exists from smaller players like Jeevandeep and Balvidya, which are comparatively much smaller in size.
In order to reduce its over dependence on the two states, the company has increased its exposure in the exports markets for its premium stationary business, which currently contributes over 15% of total sales. With over 3,000 titles and a distribution network that targets over 20,000 schools, the company has built strong entry barriers. Besides this, the most critical entry barrier is building credibility among students.
On the concern front, the company's business is very seasonal (60% of annual sales take place during May-July). As a result, challenge exists in the form of managing inventories, maintaining unsold inventories and clearing the 'older' syllabus study material. However, with a future possibility of a uniform national syllabus, some of the concerns could be taken care of. Moreover, the company is increasingly looking at the children and general books category to diversify its revenue base and de-risk from the educational business cyclicality. At Rs 225, the stock is trading at 16x its 1HFY04 earnings.
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