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  • 01 Feb 2022
  • ICICIdirect Research

Navneet reports improved financial performance

NAVNETEDUL - 153 Change: -1.31 (-0.85 %)

News: Navneet Education reported an improved financial performance with revenues surpassing pre-Covid level and registering YoY growth of 85 % to Rs.235 crore for Q3FY22 (two year CAGR of 10%; QoQ growth of 3%). Gross margin improved 28 bps YoY at 53.2%. Owing to operating leverage, staff cost (as percentage of sales) declined 1028 bps to 16.5% and other expenses to sales ratio was lower by 900 bps YoY to 21.4%. NEL reported an EBITDA margin of 15.3% (Q2FY22 13.9%) with absolute EBITDA of Rs.36 crore vs EBITDA loss of Rs.4.9 crore in Q3FY21. PBT before extraordinary items was at Rs.30 crore (Q3FY21 loss of Rs.9.7 crore; Q2FY22: Profit of Rs.30.7 crore). The company made an exceptional gain on sale of property of Rs.68 crore while it made a provision for impairment of investment in subsidiary to the tune of Rs.22.3 crore during the quarter. Consequently, PAT after extraordinary items stood at Rs.54.7 crore vs net loss of Rs.7 crore in Q3FY21.

Views: The key to sustained improvement in NEL’s performance will depend on schools reopening across all states and for all standards. The reopening of schools would lead to a recovery in the publication segment revenues which is expected to result in improved profitability for the company. Demand for stationery exports continues to remain strong and the company expects double digit growth in stationery revenues. NEL is also expanding its presence in the digital content segment, which has gained significantly owing to the pandemic. Navneet 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: Positive