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Navneet Publications (India) Ltd. | Q1FY13 Result Review | BUY | Target Price: Rs 71

Strong Topline Momentum

In Q1FY13, NPIL reported a strong topline growth on the back of syllabus change in Maharashtra and Gujarat and 7% price hike in its products. It registered sales of Rs 358.5 Cr, a y-o-y growth of 18.4%. Sequentially it reported a whooping growth of 203.6% courtesy the seasonality factor of business being in favor of Q1.

EBITDA margins witnessed marginal expansion mainly due to better management of other expenditure. It reported an EBITDA of Rs 113.9 Cr as against 95.9 Cr in Q1FY12, a growth of 18.9%. Margins rose slightly by 13 bps y-o-y from 31.65% in Q1FY12 to 31.78% in Q1FY13.

PAT margins, however, declined a tad due to higher interest cost which has more than doubled due to increase in working capital loans. NPIL reported a PAT of Rs 71.8 Cr in Q1FY13 as against Rs 61.09 Cr in Q1FY12 while PAT margins declined by 14 bps y-o-y from 20.16% in Q1FY12 to 20.02% in Q1FY13.

Valuations

Factors such as syllabus change, increase in Government and export orders and the scaling business of eSense provides NPIL huge headroom to scale up the business of its all three segments. At CMP of Rs. 55, NPIL is trading at 13.6x and 11.5x of its FY13E and FY14E consolidated earnings respectively while on P/BV front, it is available at 3.1x and 2.7x respectively. We value NPIL at 17.5x of its FY13 EPS of Rs. 4.0 which entails a target price of Rs. 71. This indicates an upside of Rs.16 (~29%). We reiterate BUY on the stock, with a one year horizon.