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Navneet: Power packed first half - Views on News from Equitymaster

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Navneet: Power packed first half

May 4, 2001

Navneet Publications seems to be on a roll this year. The company's turnover has improved by over 55% both in 1QFY02 and the first half of FY02. The company's accounting year ends in September. Based on this significant growth in turnover the company's net profit too has shown a marked improvement.

(Rs m) 2QFY01 2QFY02 Change 1HFY01 1HFY02 Change
Net Sales 198.5 308.9 55.6% 400.0 619.4 54.9%
Other Income 12.8 14.0 9.5% 25.8 26.3 2.1%
Expenditure 174.1 262.9 51.0% 340.6 518.7 52.3%
Operating Profit (EBDIT) 24.4 46.0 88.3% 59.4 100.8 69.5%
Operating Profit Margin (%) 12.3% 14.9%   14.9% 16.3%  
Interest 6 8 23.4% 10 12 22.3%
Depreciation 11 13 17.3% 21 24 17.6%
Profit before Tax 20 39 98.2% 55 91 65.9%
Tax 0 10 - 4 25 512.5%
Profit after Tax/(Loss) 20 29 46.0% 51 66 30.6%
Net profit margin (%) 9.9% 9.3%   12.7% 10.7%  
No. of Shares (eoy) (m) 9.5 19.1   9.5 19.1  
Diluted no. of shares (m) 19.1 19.1   19.1 19.1  
Diluted earnings per share* 4.1 6.0   5.3 6.9  
*(annualised)            
Current P/e ratio         21.6  

Navneet is India’s only listed publisher engaged in study guides, workbooks and question sets for students upto class XII. An increasing portion of the company’s revenues accrues from children’s books. A regional monopoly, nearly 70% of Navneet’s sales are from the states of Maharashtra and Gujarat where the company holds a dominant 55% share. Its brands ‘Navneet’ in Maharashtra and ‘Gala’ in Gujarat have been in existence for over three decades (‘Vikas’ in children’s books was introduced over eight years ago.) and are well known. With over 2,600 titles and a distribution network that targets over 20,000 schools, the company has built strong entry barriers.

Navneet's business is seasonal in nature and depends on the new term for schools. Since Navneet is a September year ending company and the schools re-open in the month of June every year, the results of the company have tradationally been better as compared to the first half.

The change in syllabi for Std X and Std XII has been a factor driving volumes in the past. (Changes in syllabi negates the sale of second hand volume sales which account for almost 30% of the book sales).

At the current price of Rs 150, the stock trades at a P/e multiple of 22 times its 1HFY02 annualised earnings.


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