Initiating Coverage – Navneet Publications India Ltd

We initiate coverage on Navneet Publications (India) Limited (NPIL) with a BUY and a Price Objective of Rs. 79 representing a potential upside of ~34.4% over a period of 24 months. At the CMP of Rs. 59, the stock is trading at 12.2x and 10.0x its estimated earnings for FY14 & FY15 respectively.

On the back of multiple growth drivers viz. proposed common curriculum, geographic expansion and improved visibility of e-learning business, we expect revenues to grow at a CAGR of 17.5% to Rs. 1,022.2 crore by FY15E from Rs. 630 crore in FY12. Further, EBITDA margins are expected to improve from 20.8% to 23.2% by FY15E as the incremental revenues from eSense business will flow directly to EBITDA.

We expect PAT to grow at a CAGR of 21.5% to Rs. 139.9 crore in FY15E from Rs. 78.0 crore in FY12. Further, we have cautiously not factored Rs. 750 crore digital learning order received by NPIL from Directorate of Primary Education, Maharashtra and remains a substantial upside risk to our estimates. On the most conservative basis, we expect ~64% upside to our FY15 EPS estimate of Rs. 5.9 per share.

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