Navneet Publications (India)
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs405
Current market price: Rs284
Publishing powerhouse
Key points
- Navneet Publications (India) (Navneet) is the leader in supplementary and reference book markets in Gujarat and Maharashtra with a share of 60% in each market.
- Navneet is all set to reap the benefits of the change in the syllabus in Gujarat (currently underway) and the same to begin in Maharashtra from FY2007, where it is overdue for two years.
- As a result of the changes in the syllabus the revenue from the company's publication business will grow at a compounded annual growth rate (CAGR) of 24% over the next three years from Rs167.52 crore in FY2005 to Rs315.25 crore in FY2008.
- In June 2005 Navneet—through its wholly-owned subsidiary in Spain—acquired the publishing business and brand of Grafalco, a Spain-based children's book company, for 459,000 euros.
- Navneet Edutainment, a wholly-owned subsidiary in the business of educational CD ROMs, would be merged with Navneet. Navneet would continue with the existing product portfolio of the edutainment business.
- The company's top line will improve at a CAGR of 17% from Rs274.54 crore in FY2005 to Rs434.28 crore in FY2005 and its bottom line will grow at a CAGR of 24% from Rs30.92 crore in FY2005 to Rs59.00 crore in FY2008.
- At the current market price of Rs284 Navneet's stock trades at a price/earnings ratio (PER) of 11x FY2007 (9x FY2008) and enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA) of 7.12x FY2007 (6.05x FY2008). We recommend a Buy on Navneet with a price target of Rs405