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Growth momentum intact
Education companies are likely to deliver strong results
in Q4. However, we expect the companies under active
coverage to register 6% growth during Q4FY12 due to
unique one-off reasons. While Q4 is seasonly a weak
quarter for Navneet, NIIT’s single digit growth stems
from the sale of Element K business in Q3 that would
lead to lower revenue in Q4. We believe the growth in
topline would be largely driven by multimedia solutions
to private schools, vocational courses and IT training
segments. Within the space, we like Navneet Publication
and NIIT considering attractive valuations, strong
topline growth and better prospects of improving their
margin profiles in FY13E.
Topline growth to continue: We expect the growth
momentum to continue for companies given the
opportunity in the space and also because Q4 is
seasonally a better quarter. Segments including
multimedia solutions to private schools and IT training
business would be key drivers. In case of Navneet, Q4 is
seasonally a weak quarter. NIIT (excluding corporate
learning solution) is likely to register 12% YoY growth.
Operating margin to decline on one-offs: NIIT would
witness subdued margin as the individual learning
segment is in the process of integration. We believe
that NIIT would see margin expansion in FY13E on the
back of better sales mix in favour of individual learning
solutions and school learning solutions.
Prefer Navneet Publication and NIIT in the space: We
prefer NIIT in the space considering attractive
valuations and prospects of margin expansion in FY13E.
Within the Publication space, we like Navneet
Publciation given its strong growth momentum for
FY13E/14E and margin expansion and improvement in
return ratios.
Navneet Publication (Rating – Buy; Target Price – Rs75)
We expect Navneet to register 6.5% YoY revenue decline in Q4FY12 on the back of a drop in
stationery revenues. Normally, Q4 is a weak quarter for the company.
We expect the company to report a decline in operating margin of 9%, on the back of lower
margins in the stationery business. We expect the margin to improve from FY13E mainly due to
higher exports growth and better sales mix in favor of publication business.
We expect net profit to decline by 57.3% to Rs34mn mainly due to lower EBITDA on YoY basis.
NIIT (Rating – Buy; Target Price – Rs66)
We expect NIIT to register 18.3% YoY revenue decline mainly due to the sale of Element K
business during Q3FY12. We expect the company to post 11.6% growth (ex-corporate learning
solution).
Operating margin is expected to contact marginally to 11.6% on YoY basis mainly due to lower
margin in individual learning solution and school learning solution. The margin profile is likely
to expand in FY13E with better sales mix in favor of individual learning solution.
We expect net profit to decline by 35.8% YoY on the back of lower EBITDA.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Growth momentum intact
Education companies are likely to deliver strong results
in Q4. However, we expect the companies under active
coverage to register 6% growth during Q4FY12 due to
unique one-off reasons. While Q4 is seasonly a weak
quarter for Navneet, NIIT’s single digit growth stems
from the sale of Element K business in Q3 that would
lead to lower revenue in Q4. We believe the growth in
topline would be largely driven by multimedia solutions
to private schools, vocational courses and IT training
segments. Within the space, we like Navneet Publication
and NIIT considering attractive valuations, strong
topline growth and better prospects of improving their
margin profiles in FY13E.
Topline growth to continue: We expect the growth
momentum to continue for companies given the
opportunity in the space and also because Q4 is
seasonally a better quarter. Segments including
multimedia solutions to private schools and IT training
business would be key drivers. In case of Navneet, Q4 is
seasonally a weak quarter. NIIT (excluding corporate
learning solution) is likely to register 12% YoY growth.
Operating margin to decline on one-offs: NIIT would
witness subdued margin as the individual learning
segment is in the process of integration. We believe
that NIIT would see margin expansion in FY13E on the
back of better sales mix in favour of individual learning
solutions and school learning solutions.
Prefer Navneet Publication and NIIT in the space: We
prefer NIIT in the space considering attractive
valuations and prospects of margin expansion in FY13E.
Within the Publication space, we like Navneet
Publciation given its strong growth momentum for
FY13E/14E and margin expansion and improvement in
return ratios.
Navneet Publication (Rating – Buy; Target Price – Rs75)
We expect Navneet to register 6.5% YoY revenue decline in Q4FY12 on the back of a drop in
stationery revenues. Normally, Q4 is a weak quarter for the company.
We expect the company to report a decline in operating margin of 9%, on the back of lower
margins in the stationery business. We expect the margin to improve from FY13E mainly due to
higher exports growth and better sales mix in favor of publication business.
We expect net profit to decline by 57.3% to Rs34mn mainly due to lower EBITDA on YoY basis.
NIIT (Rating – Buy; Target Price – Rs66)
We expect NIIT to register 18.3% YoY revenue decline mainly due to the sale of Element K
business during Q3FY12. We expect the company to post 11.6% growth (ex-corporate learning
solution).
Operating margin is expected to contact marginally to 11.6% on YoY basis mainly due to lower
margin in individual learning solution and school learning solution. The margin profile is likely
to expand in FY13E with better sales mix in favor of individual learning solution.
We expect net profit to decline by 35.8% YoY on the back of lower EBITDA.
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