Prabhudas Lilladher's research report on Navneet Education
NELI reported consolidated loss of Rs22mn due to rising losses in K12 business amid change in accounting policy relating to recognition of marketing expenses and higher tax outgo of Rs120mn since set off against losses incurred in subsidiaries was not availed. Performance of standalone business was broadly in-line with our expectations with revenues of Rs3,262mn (PLe of Rs3,132mn) and EBITDA margin of 15.9% (PLe 18.0%). Post COVID, as NELI has intensified focus on Ed-Tech, losses will have to be seeded over the next 2-3 years. Consequently, we cut our consolidated EPS estimates by ~9-10% over FY23-FY25E.
Outlook
However, core business remains on strong footing with NEP implementation around the corner coupled with healthy traction in stationary exports which is expected to result in standalone PAT (excluding losses from EdTech and K12 Techno) CAGR of 13% over FY23-FY25E. We value NELI on SOTP basis given diversity in the business. Core publication and stationary segment is valued at 12x Sep24E EPS while we arrive at per share value of EdTech/K12 businesses at Rs9/Rs19 respectively. Retain BUY with a TP of Rs163.
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