Navneet Education
BSE SENSEX
31,109
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
Financials & Valuations (INR b)
2017
2018E
Y/E Mar
11.8
14.0
Net Sales
2.8
3.4
EBITDA
1.8
2.2
PAT
7.8
9.4
EPS (INR)
53.7
21.6
Gr. (%)
31.1
36.8
BV/Sh (INR)
26.8
27.8
RoE (%)
23.1
23.7
RoCE (%)
22.7
18.7
P/E (x)
5.7
4.8
P/BV (x)
S&P CNX
9,605
ICNT IN
Results exceed estimates; Exports to drive growth
233.6
EBITDA, PAT beat estimates:
NELI’s overall revenue rose 12% to INR2,098m
41.1 / 0.6
(est. of INR2,026m) in 4QFY17 from INR1,875m in the year-ago period, as
182 / 85
Stationery business grew ~21%. EBITDA grew 12% YoY from INR249m to
1/45/81
20
INR279m (est. INR243m), with the margin remaining flat at 13.3% (est. of
38.2
12%). Consequently, adj. PAT grew 80% YoY from INR94m to INR169m (est.
29 May 2017
4QFY17 Results Update | Sector: Publishing
CMP: INR176
TP: INR226(+29%)
Buy
2019E
16.4
4.0
2.6
11.3
20.0
43.6
28.2
25.1
15.5
4.0
Estimate change
TP change
Rating change
of INR130m). Consolidated results include subsidiary Indiannica’s
(Britannica) revenue of INR633m and PBT of INR254m only of 4Q. For FY17,
revenue grew by 24% to INR11.8b, EBITDA margin by 210bp to 23.8% and
PAT by 51% to INR1,811m.
Publication and Stationery deliver healthy growth:
In FY17, Publication
revenue grew by 15% to INR5,959m and Stationery revenue by 20% to
INR49,332m. Publication revenue includes export sales of INR226m (up
118%) and government sales of INR119m. Within Stationary, exports grew
34% to INR2,314m. EBITDA margin in Publication stood at 38% and in
Stationary at 13%. EBITDA grew 18.6% in Publication and 47% in Stationary.
Management expects strong growth, margin expansion:
With syllabus
change in Maharashtra/Gujarat, growth should be strong in Publication in
FY18 and FY19. On account of strong order book and visibility, Stationary is
expected to deliver 20%+ growth, mainly driven by exports. Exports are
expected to remain strong through the year and not just during the ‘back to
school’ period. Since margin in exports (16%) is higher than that in domestic
business (12%), overall margins are expected to expand. NELI also plans to
hike prices by 5-5.5% to counter cost inflation.
Valuation and view:
In Publication, we believe NELI is well placed to capture
growth triggers like changing syllabus, common curriculum across India, and
conversion of SEB schools to CBSE. We like export-led growth in Stationery
and NELI’s future-ready eSense platform. We expect 18% revenue CAGR and
21% PAT CAGR over FY17-19E. Maintain
Buy
with a TP of INR226 (20x FY19E
EPS).
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Quarterly Performance (Consolidated)
Niket Shah
(Niket.Shah@MotilalOswal.com); +91 22 6129 1535
Chintan Modi
(Chintan.Modi@MotilalOswal.com); +91 22 6129 1554

Navneet Education
Results beat estimates
NELI reported overall revenue of INR2,098m (est. INR2,026m) in 4QFY17
marking a YoY growth of 12%.
The growth of ~21% in stationery products business coupled with lower other
expenses (a drop of 140bp to 26.9% of sales) led to an expansion of 12% YoY in
EBITDA to INR279m (est. INR243m) in 4QFY17.
EBITDA margins remained flat at 13.3% (est. 12%) in 4QFY17 and adj. PAT grew
by 80% YoY from INR94m in 4QFY16 to INR169m (est. INR130m) in 4QFY17.
For FY17, revenue grew by 24% to INR11.8b, EBITDA margins grew by 210bp to
23.8% and PAT growing by 51% to INR1,811m. Going forward, a growth of 20%+
is expected in FY18 majorly due to steady growth in publications and stationery
business.
The consolidated results include revenue of INR633m and PBT of INR254m only
of 4Q of the subsidiary Indiannica Learning Private Limited (formerly
Encyclopaedia Britannica (India) Private Limited) since it was acquired on 30th
Dec, 2016. Hence the consolidated results for the whole year of the company do
not reflect the full year results of the subsidiary. In view of seasonal nature of
business of the subsidiary, financial results of this quarter of the year are not
representative of the operations of the whole year. The subsidiary, for the year
ended March 31, 2017 has total revenue of INR715m and the Loss before tax is
INR146m.
Exhibit 1: Revenue trend
Revenue (INR m)
25%
3%
1%
-3%
5%
-21%
-16%
2%
Growth(%)
46%
9%
39%
12%
4,937 1,478 1,345 1,834 5,161 1,174 1,129 1,875 5,605 1,714 1,566 2,098
Source: MOSL, Company
Exhibit 2: EBITDA trend
EBITDA (INR m)
30%
18% 18% 18%
31%
13%
10% 11%
Margins (%)
32%
17%
Exhibit 3: PAT trend
PAT (INR m)
27%
13% 13%
-12% -4% -4%
Growth (%)
70% 68% 80%
9%
-8%
-37% -40%
16%
1,503 261 239 330 1,580 117 121 249 1,802 298 203 279
898 120 118 157 983 109 75
94 1,136 186 126 169
Source: MOSL, Company
Source: MOSL, Company
29 May 2017
2

Navneet Education
Exports, strong visibility of order book to lead growth
Stationery business is expected to grow at current pace as exports sales
continues to grow at healthy pace (34% in FY17 to INR2,315m).
Export sales of publications business too grew by 118% to INR226m in FY17. The
trend is expected to continue as the exports business begins to spread evenly
across all quarters.
As syllabus in Maharashtra and Gujarat continues to change, the revenue of
1QFY18 from publications business is expected to be deferred till 2QFY18.
Although, acquisition of Indiannica is set to boost this segment with increased
visibility in newer states and overseas.
Valuation and view
In view of steady growth in both stationery and publications segments led by
robust growth in exports business, along with the strong visibility of order book,
we maintain our earnings estimates. We expect NELI to post 18% revenue CAGR
and 21% PAT CAGR over FY17-19E. Maintain
Buy
with a TP of INR226 (20x FY19E
EPS).
Exhibit 4: Price to earnings (one year forward)
Exhibit 5: Price to book (one year forward)
Source: MOSL, Company
Source: MOSL, Company
29 May 2017
3

Navneet Education
Story in charts
Exhibit 6: Growth in stationery segment to remain steady
Total Stationery Revenue
31%
17%
2%
2%
21% 20% 20%
11%
-3%
8%
YoY Growth
Exhibit 7: Publishing Content to maintain a growth of ~15%
Total Publishinig Revenue
29%
18%
4%
12%
-3%
YoY Growth
18% 15% 15%
2,401 2,441 2,493 3,260 3,812 4,224 4,077 4,933 5,920 7,104
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E
Source: MOSL, Company
2,766 2,993 3,540 4,572 4,751 5,319 5,160 6,075 6,986 8,034
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E
Source: MOSL, Company
Exhibit 8: Stationery exports sales to grow faster than domestic sales
Domsetic Stationery revenue
19%
11%
3%
8%
1%
-7%
-20%
1,705 1,886 1,950 2,114 2,509 2,528 2,338 2,619 2,881 3,111
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E
697
554
-2%
14%
30%
2%
12%
10%
8%
33% 25%
20%
YoY Growth
Export Stationery revenue
111%
YoY Growth
542 1,146 1,303 1,697 1,738 2,315 2,893 3,472
FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18E FY19E
Source: MOSL, Company
Exhibit 9: Robust RoCEs
ROCE(%)
24.1
18.2
20.8
18.7
19.5
17.4
23.7
25.1
Exhibit 10: Free Cash Flows to remain strong
FCF (INR m)
1,446
377
1,685
1,222
1,995
1,982
162
-423
FY12
FY13
FY14
FY15
FY16
FY17
FY18E FY19E
FY12
FY13
FY14
FY15
FY16
FY17
FY18E FY19E
Source: MOSL, Company
Source: MOSL, Company
29 May 2017
4

Navneet Education
Exhibit 11: Key Assumptions
Non Paper Stationery (Domestic)
Revenues(INR m)
Publishing revenues
Stationery
E-Sense
Britannica
Others
Total Revenues (INR m)
Growth %
Publishing revenues
Stationery
E-Sense
Britannica
Others
Total Growth %
21%
30%
29%
31%
61%
4%
17%
40%
-
-34%
9%
12%
11%
-3%
31%
1%
11%
-3%
-3%
-2%
25%
48%
-3%
18%
21%
-9%
-5%
-7%
18%
15%
20%
2%
15%
0%
24%
15%
20%
2%
25%
0%
17%
4,572
3,260
149
-
77
8,057
4,751
3,812
208
458
50
8,821
5,319
4,224
201
600
51
9,795
5,160
4,077
198
749
75
9,509
6,075
4,933
180
715
70
11,258
6,986
5,920
184
822
70
13,981
8,034
7,104
187
1,028
70
16,422
FY13
FY14
FY15
FY16
FY17
FY18E
FY19E
Source: MOSL, Company
29 May 2017
5

Navneet Education
Financials and Valuations
Income Statement –
Consolidated
Y/E March
Total Income from Operations
Change (%)
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income
PBT bef. EO Exp.
EO Items
PBT after EO Exp.
Current Tax
Tax Rate (%)
Reported PAT
Adjusted PAT
Change (%)
Margin (%)
FY14
8,821
9.5
2,080
23.6
258
1,822
100
35
1,757
0
1,757
605
34.4
1,152
1,152
7.1
13.1
FY15
9,795
11.0
2,367
24.2
308
2,060
91
28
1,996
0
1,996
693
34.7
1,303
1,303
13.2
13.3
FY16
9,526
-2.7
2,064
21.7
297
1,768
36
167
1,899
0
1,899
697
36.7
1,202
1,202
-7.8
12.6
FY17
11,813
24.0
2,813
23.8
284
2,529
43
152
2,638
0
2,638
827
31.3
1,811
1,811
50.7
15.3
(INR Million)
FY18E
13,981
18.4
3,383
24.2
293
3,090
36
154
3,208
0
3,208
1,006
31.3
2,203
2,203
21.6
15.8
FY19E
16,422
17.5
4,007
24.4
303
3,704
30
178
3,851
0
3,851
1,207
31.3
2,644
2,644
20.0
16.1
Balance Sheet
Y/E March
Equity Share Capital
Preference Capital
Total Reserves
Net Worth
Minority Interest
Deferred Liabilities
Total Loans
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Capital WIP
Curr. Assets, Loans&Adv.
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Curr. Liability & Prov.
Account Payables
Provisions
Net Current Assets
Appl. of Funds
Appl. of Funds
FY14
476
3
4,307
4,787
1
73
2,337
7,197
3,673
1,798
1,874
45
6,042
3,337
1,961
69
675
1,253
643
610
4,789
7,197
7,680
FY15
476
0
4,956
5,433
1
41
1,436
6,909
3,741
2,042
1,699
40
5,995
3,484
1,886
55
571
1,317
586
731
4,678
6,909
8,587
FY16
476
0
5,763
6,240
0
41
995
7,276
4,108
2,338
1,769
8
5,506
3,057
2,144
53
251
745
653
92
4,761
7,276
11,169
FY17
467
0
6,789
7,256
0
24
1,459
8,739
4,302
2,622
1,680
28
6,605
3,715
2,415
37
438
1,158
1,023
135
5,447
8,739
12,754
(INR Million)
FY18E
467
0
8,120
8,587
0
24
1,459
10,070
4,452
2,915
1,536
0
8,922
4,405
2,911
1,124
482
1,973
951
1,021
6,949
10,070
14,318
FY19E
467
0
9,724
10,191
0
24
959
11,174
4,602
3,218
1,383
0
10,546
5,152
3,329
1,536
530
2,340
1,120
1,220
8,206
11,174
16,520
29 May 2017
6

Navneet Education
Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/EBITDA
Dividend Yield (%)
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Inventory (Days)
Debtor (Days)
Creditor (Days)
Working Cap. Turnover (Days)
Leverage Ratio (x)
Debt/Equity
FY14
4.8
5.9
20.1
2.0
48.4
36.4
29.7
8.8
4.9
20.9
1.1
25.7
18.7
19.7
135
80
26
191
0.5
FY15
5.5
6.8
22.8
2.2
48.4
32.2
26.0
7.7
4.3
17.9
1.3
25.5
19.5
20.8
127
69
21
169
0.3
FY16
5.0
6.3
26.2
2.2
52.5
34.9
28.0
6.7
4.4
20.4
1.3
20.6
17.4
17.5
117
82
25
180
0.2
FY17
7.8
9.0
31.1
2.4
37.3
22.7
19.6
5.7
3.6
15.1
1.4
26.8
23.1
25.6
115
75
32
167
0.2
FY18E
9.4
10.7
36.8
3.1
39.6
18.7
16.5
4.8
3.0
12.2
1.8
27.8
23.7
29.4
113
74
24
149
0.2
FY19E
11.3
12.6
43.6
3.7
39.3
15.5
13.9
4.0
2.5
10.1
2.1
28.2
25.1
33.0
112
72
24
145
0.1
Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Depreciation
Interest & Finance Charges
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
Others
CF from Operating incl EO
(inc)/dec in FA
Free Cash Flow
(Pur)/Sale of Investments
Others
CF from Investments
Issue of Shares
(Inc)/Dec in Debt
Interest Paid
Dividend Paid
Others
CF from Fin. Activity
Inc/Dec of Cash
Opening Balance
Closing Balance
FY14
1,757
258
0
-607
-889
519
72
591
-430
162
-163
-24
-617
-1
658
-97
-501
0
59
34
35
69
FY15
1,996
308
0
-651
-100
1,553
69
1,622
-176
1,446
-11
106
-81
-3
-901
-93
-557
0
-1,555
-14
69
55
FY16
1,909
288
-3
-743
542
1,993
-50
1,942
-258
1,685
-6
5
-258
0
-401
-37
-1,247
0
-1,685
-1
55
53
FY17E
2,638
284
0
-827
-702
1,392
43
1,435
-213
1,222
-847
445
-615
-582
464
-43
-675
0
-836
-16
53
37
FY18E
3,208
293
0
-1,006
-415
2,081
36
2,117
-122
1,995
0
0
-122
0
0
-36
-871
0
-908
1,087
37
1,124
(INR Million)
FY19E
3,851
303
0
-1,207
-846
2,101
30
2,132
-150
1,982
0
0
-150
0
-500
-30
-1,040
0
-1,570
411
1,124
1,536
29 May 2017
7

Navneet Education
Corporate profile
Indo Count Industries Ltd (ICNT) is focused player on
bedding—a niche segment of home textile market, which
formed 81% of revenues in FY15. It’s other two segments
spinning and consumer goods contributed 16% and 3%
respectively. In terms of EBITDA, home textiles
contributed 95% of total EBITDA in FY15.With a unique
asset-light business model, ICNT enjoys robust and best
in class capital efficiency (40% RoCE). Entry in newer
products expands opportunity by 3x to USD13b.
Source: MOSL/Bloomberg
Company description
Exhibit 1: Sensex rebased
Exhibit 2: Shareholding pattern (%)
Mar-17
Promoter
DII
FII
Others
58.9
3.9
17.2
20.0
Dec-16
58.9
3.3
14.0
23.7
Mar-16
59.0
1.7
13.3
26.1
Source: Capitaline
Exhibit 3: Top holders
Holder Name
Elm Park Fund Limited
Lazard Emerging Markets Small Cap Equity
Trust
Morgan Stanley Mauritius Company Limited
Uniworth Finance And Securities Pvt Ltd
Dsp Blackrock Small And Mid Cap Fund
% Holding
6.0
2.8
2.1
1.5
1.3
Source: Capitaline
Note: FII Includes depository receipts
Exhibit 4: Top management
Name
Anil Kumar Jain
Mohit Kumar Jain
K R Lalpuria
Amruta Avasare
Designation
Executive Chairman
Managing Director
Executive Director
Company Secretary
Exhibit 5: Directors
Name
Dilip J Thakkar
Prem Malik
Sushil Kumar Jiwarajka
Kamal Mitra
Name
P N Shah
R Anand
Vaijayanti Pandit
Source: Capitaline
*Independent
Exhibit 6: Auditors
Name
B K Shroff & Co
S Anantha & Co
Suresh Kumar Mittal & Co
Type
Statutory
Secretarial Audit
Internal
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY18
FY19
MOSL
forecast
9.4
11.3
Consensus
forecast
16.7
18.7
Variation (%)
-43.7
-39.7
Source: Bloomberg
Source: Capitaline
29 May 2017
8

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In respect of any matter arising from or in connection with the research you could contact the following representatives of Motilal Oswal Capital Markets Singapore Pte Limited:
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Motilal Oswal Tower, Level 9, Sayani Road, Prabhadevi, Mumbai 400 025
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