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  • 03 Aug 2022
  • ICICIdirect Research

NAVNEET EDUCATION REVENUES, PROFITABILITY INCHING TOWARDS PRE-COVID LEVELS

NAVNETEDUL - 141 Change: -0.59 (-0.42 %)

News: Navneet Education (NEL) reported a steady financial performance with revenues registering YoY growth of 118 % (on a favourable base) to Rs 694 crore for Q1FY23 (QoQ growth of 115%, 87% of pre-Covid level). Gross margin improved 198 bps YoY at 50.1%%. Owing to operating leverage, staff cost (as percentage of sales) declined 353 bps to 7.9% and other expenses to sales ratio was lower by 325 bps YoY to 14.1%. NEL reported an EBITDA margin improvement of 888 bps YoY to 28.3% (Q4FY22 19.5%) with absolute EBITDA of Rs 196 crore (85% of pre Covid level) vs. EBITDA of Rs 61.8 crore in Q1FY22. Consequently, PAT was at Rs 139.4 crore (95% of pre Covid level) vs net profit of Rs 44.5 crore in Q1FY22.

Views: Q1 is the most important quarter for Navneet Education in terms of revenue and profitability. The reopening of schools has led to recovery in the publication segment revenues (85% of pre-Covid levels), however many schools have reopened in July, 2022 which is expected to result in spill over of publication segment revenues to Q2FY23. Even the stationery revenues are still below pre Covid level (around 90%). The company expects the spillover of Q1FY23 publication revenues to Q2FY23 to enable its H1FY23 revenues to reach pre-Covid levels.  NEL is also expanding its presence in the digital content segment, which has gained significantly owing to the pandemic. Strong stationery business prospects and publication segment inching towards normalcy augurs well for Navneet. NEL has over the years, maintained balance sheet prudence having a virtually debt free status, which will aid in tiding over the current challenging market scenario.

Impact: Neutral.