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BEML Surges by 7.86% on Likely Upgrade to Navratna Status
Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - December 18, 2023

Record-breaking CPCU Conversions Propel Affle India's 21.06% Revenue Growth

Record-breaking CPCU Conversions Propel Affle India’s 21.06% Revenue Growth

Company Name: Affle India Ltd | NSE Code: AFFLE | BSE Code: 542752 | 52 Week high/low: 1,244/866 | CMP: INR 1,244| Mcap: INR 17,439 Cr | PE: 66

Company Overview:

Affle India is a leading IT company engaged in providing mobile advertisement and software development services. The company operates in two business segments: Consumer Platform, delivering consumer recommendations and conversions through relevant mobile advertising, and Enterprise Platform, enabling offline businesses to go online through app development, O2O commerce, and data analytics. Affle India has a robust global reach in North America, Japan, Korea, and Australia.

Consumer Platform Thrives, Enterprise Platform Faces Challenges

In Q2FY24, the cost per converted user (CPCU) business model drove 92.9% of revenue, with the Consumer Platform segment growing 16.61% YoY. The Enterprise Platform revenue declined by 23.24% YoY, resulting in a standalone revenue surge of 15.51% YoY. The robust growth in the CPCU business model offset the slowdown in the enterprise platform segment during the quarter.

Record-breaking CPCU Conversions Propel Revenue Growth

During the quarter, the CPCU business achieved 72 Mn conversions, compared to 64.7 Mn in the same quarter last year. The average CPCU rate was 55.6 Rs, contributing to robust revenue growth of 21.06% YoY, reaching 400 Cr in Q2FY24.

Resilience Amid Challenges: Impact of Online Gaming and Fintech

Despite a combined impact of about Rs. 250 million from online gaming in India and the Fintech vertical in developed markets, the company delivered its highest revenue and EBITDA ever in this quarter and in the CPCU business. Regulatory changes towards the applicability of GST in the online gaming industry in India caused a pullback effect of about Rs. 110 million.

Valuation and Key Ratios

As of now, the stock trades at a multiple of 66x earnings per share (EPS) (TTM) of Rs 19.8, with a market price of Rs 1,244. The stock is valued at 10.4 times its book value of Rs 120 per share. In terms of EV/EBITDA, the company ranks 4th with a multiple of 46.61x, compared to the industry median of 17.88x. The trailing twelve-month return on equity (ROE) and return on capital employed (ROCE) stand at 18.5% and 20.2%, respectively. The interest coverage ratio is robust at 20.2x, indicating the company’s solvency.

Q2FY24 Result Update: Standalone

➡️In Q2FY24, standalone revenue grew 15.51% YoY (-2.41% QoQ) to 134Cr, driven by robust growth in the CPCU business.

➡️Consumer platform segment reported revenue of 131 Cr, growing 16.61% YoY, while the enterprise segment showed a slowdown in revenue by 23.24% YoY, resulting in a 15.51% growth in standalone revenue.

➡️EBITDA surged 25.16% YoY (+20.39% QoQ) to 21 Cr, driven by the consumer platform segment. EBITDA margin improved 120 bps YoY and 300 bps QoQ to 15.86%.

➡️Operating profit (EBIT) increased by 27.59% YoY (+22.83% QoQ) to 19 Cr, with an EBIT margin jumping by 130 bps YoY and 290 bps QoQ to 14.33%.

➡️Profit after tax (PAT) saw a remarkable surge of 22.69% YoY (+16.63% QoQ) to 18 Cr, and the PAT margin expanded by 80 bps YoY and 220 bps QoQ to 13.58%.

➡️Earnings per share (EPS) for the quarter stood at 1.30 Rs, compared to 1.11 Rs in the previous quarter.

Conclusion

Affle India’s Q2FY24 results reflect a strong performance driven by the robust growth in the CPCU business model, offsetting challenges in the enterprise platform segment. Despite external impacts from online gaming and Fintech, the company achieved its highest revenue and EBITDA, showcasing resilience and adaptability. The valuation and key ratios underscore the company’s solid financial standing. Affle India continues to demonstrate its position as a leading player in mobile advertising and software development services.

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Strategic Partnerships Fuel One97’s Financial Turnaround

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BHEL Secures Major Power Project Contracts from Adani Group
Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - December 15, 2023

BDL Lands Massive Rs 750 Cr Army Missile Order

BDL Lands Massive Rs 750 Cr Army Missile Order

Company Name: Bharat Dynamic Ltd | NSE Code: BDL | BSE Code: 541143 | 52 Week high/low: 1,410/787 | CMP: INR 1,381 | Mcap: INR 25,313 Cr | PE: 59.4

Company Overview:

Bharat Dynamics Ltd is a government entity under the Ministry of Defence, Government of India. The company is actively involved in manufacturing and supplying guided missiles, underwater weapons, airborne products, and other allied defense equipment for the Indian Army. Currently, it operates three manufacturing facilities in Hyderabad, Telangana, Bhanur, and Vishakhapatnam, Andhra Pradesh. Recently, BDL secured a significant supply order of Anti-Tank Guided Missiles (ATGM) worth Rs 750 Cr from the Indian Army.

Robust New Order Book in Q2:

In Q2FY24, Bharat Dynamics Ltd experienced a surge in new orders, totaling Rs 1,659 Cr from April 23 to September 30, 2023. This strengthened the company’s total order book to an impressive Rs 20,766 Cr as of September 30, 2023. Notable orders include the ATGM order (Rs 750 Cr), upgraded version of Akash Missiles (Rs 247 Cr), LBRM (Rs 254 Cr), and ULPGM (Rs 105 Cr).

Robust Sequential Revenue Growth

During Q2FY24, the standalone revenue from operations witnessed remarkable growth, increasing by 106.84% QoQ and 15.15% YoY, reaching Rs 616 Cr. This substantial revenue growth was attributed to the higher order book of Rs 1,659 Cr in Q2FY24. While the Cost of Goods Sold (COGS) rose by 118.41% QoQ and 13.88% YoY to Rs 271 Cr, the gross profit for the quarter surged by 98.55% QoQ and 16.17% YoY, amounting to Rs 344 Cr. The gross margin experienced a YoY increase of 50 basis points but declined by 230 basis points QoQ.

Improved Performance QoQ:

BDL’s Q2FY24 performance was impressive, partially attributed to the realization of some lagged revenue from FY23. Key highlights include a 42.8% YoY increase in EBITDA to INR 1.3 billion, with an EBITDA margin improvement of 422 basis points to 21.8%. Other expenses rose by 41% YoY due to repairs and provisions. Billed receivables increased, offset by a decline in unbilled receivables. Other income rose by 74% YoY to INR 783 million. The order book at end-September 2023 stood at INR 200 billion, indicating a robust book-to-bill ratio of 9.3x.

Valuation and Key Ratios

As of now, the stock trades at a multiple of 59.4x earnings per share (EPS) (TTM) of Rs 23.2, with a market price of Rs 1,381. The stock is valued at 7.47 times its book value of Rs 184 per share. In terms of EV/EBITDA, the company ranks 3rd with a multiple of 33.9x, compared to the industry median of 22.4x. The trailing twelve-month return on equity (ROE) and return on capital employed (ROCE) stand at 11.3% and 15.6%, respectively. The interest coverage ratio is robust at 175x, indicating the company’s solvency.

Q2FY24 Result Update: Consolidated

➡️In Q2FY24, standalone revenue grew 15.15% YoY (+106.84% QoQ) to 616 Cr, driven by the strong new order book in the quarter.

➡️Gross profit increased 16.17% YoY (+98.55% QoQ) to 344 Cr, while gross margin dropped 230 bps QoQ (+50 bps YoY) to 55.92%.

➡️EBITDA surged 42.82% YoY (-510.66% QoQ) to 134 Cr, driven by robust growth in topline and margin improvement. EBITDA margin improved 400 bps YoY to 21.77%.

➡️Operating profit (EBIT) increased by 60.75% YoY (-335.44% QoQ) to 116 Cr, with an EBIT margin jumping by 530 bps YoY to 18.94%.

➡️Profit after tax (PAT) saw a remarkable surge of 94.02% YoY (+251.76% QoQ) to 147 Cr, and the PAT margin expanded by 970 bps YoY and 980 bps QoQ to 23.89%.

➡️Earnings per share (EPS) for the quarter stood at 8.04 Rs, compared to 2.28 Rs in the previous quarter.

Conclusion

Bharat Dynamics Ltd demonstrated a robust performance in Q2FY24, marked by substantial revenue growth, a strengthened order book, and improved margins. The company’s strategic positioning in the defense sector, coupled with a solid financial foundation, reflects positively in its valuation metrics. With a significant order pipeline and efficient financial management, BDL remains well-positioned for sustained growth in the defense manufacturing sector.

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Strategic Partnerships Fuel One97’s Financial Turnaround

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Inox Wind Energy Ltd Surges as NCLT Approves Merger with Inox Wind Ltd
Business, Equities, Expert Views, Investor Forum, IPO research, Market News, Markets, Research, Research Reports, Result Updates - December 14, 2023

Inox India Limited: Navigating the cryogenic frontier - IPO Insights

Inox India Limited: Navigating the cryogenic frontier – IPO Insights
IPO note of Inox India Limited
Price Band: Rs 627-660
Issue Date: 14th Dec-18th Dec
Recommendation: Apply

Company Overview: 

Inox India Limited is a leading manufacturer and supplier of cryogenic equipment, offering a diverse portfolio that includes standard cryogenic tanks, beverage kegs, bespoke technology, equipment, and solutions, as well as large-scale turnkey projects. Their extensive product range caters to various industries such as industrial gases, liquefied natural gas (LNG), green hydrogen, energy, steel, medical and healthcare, chemicals and fertilizers, aviation and aerospace, pharmaceuticals, and construction. From providing solutions for the storage and transportation of cryogenic fluids to contributing to the emerging fields of green hydrogen and LNG, Inox India Limited is committed to delivering innovative and customized cryogenic solutions across a broad spectrum of applications.

Company Profile:

Inox India Limited is a leading manufacturer and supplier of cryogenic equipment, offering a diverse portfolio that includes standard cryogenic tanks, beverage kegs, bespoke technology, equipment, and solutions, as well as large-scale turnkey projects. Their extensive product range caters to various industries such as industrial gases, liquefied natural gas (LNG), green hydrogen, energy, steel, medical and healthcare, chemicals and fertilizers, aviation and aerospace, pharmaceuticals, and construction. From providing solutions for the storage and transportation of cryogenic fluids to contributing to the emerging fields of green hydrogen and LNG, Inox India Limited is committed to delivering innovative and customized cryogenic solutions across a broad spectrum of applications.

The Objects of the Issue:

  • Total Issue Size: Rs. 1459.32 Crore (at the upper price band of Rs. 660 per share)
  • Offer Type: Entirely Offer for Sale (OFS)
  • Number of Shares Offered: 2.21 crore shares
  • Face Value per Share: Rs. 2

Outlook and Valuation:

  • Inox India is the leading manufacturer of cryogenic storage tanks in India, holding a significant market share.
  • The company has a robust order book worth over Rs. 1000 crore, indicating healthy demand for its products.
  • Inox India is debt-free, which strengthens its financial position and provides room for future growth.
  • The Indian gas industry is expected to grow at a CAGR of 10% in the coming years, which could benefit Inox India as a key supplier of storage tanks.
  • Inox India Limited boasts superior EBITDA margins, exceeding 21%, a significant achievement compared to the average among listed capital goods players.
  • The company has consistently delivered a Return on Capital Employed (ROCE) of over 30% in recent years, attributed to strong asset turns ranging from 1.4 to 1.8 times historically.
  • The growing importance of green fuels, specifically liquid hydrogen, and a preference for liquefied natural gas (LNG) over diesel have contributed to robust top-line growth for Inox.
  • The company has witnessed a commendable 14% Compound Annual Growth Rate (CAGR) in revenue over the period FY20-23 and a noteworthy 16% growth in the first half of FY24.
  • Inox’s financial performance aligns closely with listed capital goods players, reflecting its competitive standing in the industry.

    ISSUE OFFER  
    Price band (INR) 627-660
    Bidding date 14th Dec-18th Dec
    Total IPO size (Cr) 1,459.32
    Fresh issue (Cr) NIL
    Offer for sale (Cr) 1,459.32
    Market lot 22
    Face value (INR) 2
    Listing on NSE, BSE
    Retail Allocation 35%

Competitive Strengths:

  • Inox India boasts a commanding market share in the Indian cryogenic storage tank market, exceeding 70%. This translates to strong brand recognition and customer loyalty.
  • They offer a diverse portfolio of tanks catering to various capacities and applications, ranging from small units for medical labs to large facilities for industrial gas storage.
  • Inox India serves a diverse clientele, including leading gas companies, government agencies, and pharmaceutical firms. This diversification mitigates risks associated with relying on a limited number of customers.
  • Inox India Limited attains operational excellence through vertical integration, advanced technological expertise, and an experienced workforce, ensuring superior quality and efficiency in cryogenic equipment manufacturing.
  • Inox India Limited demonstrates financial stability with a history of profitability, consistent revenue growth, a debt-free status enhancing financial flexibility, and a healthy order book reflecting sustained demand and growth potential.

Key Strategies:

Inox India Limited aims to capitalize on opportunities in the LNG and hydrogen sectors within the global clean energy transition, strategically capturing the full value chain across its product lines. The company plans to expand its standard cryogenic and non-cryogenic equipment business into international markets, further broadening its reach. Additionally, Inox aims to grow its large turnkey project business and remains committed to ongoing efforts to enhance operational efficiency and productivity.

Key Concerns:

  • Inox India Limited, despite not owning the name “INOX,” utilizes it as part of its corporate identity under a name license agreement with the Jain family, entailing an annual royalty of 0.25% of consolidated revenues, with potential ad-hoc increases impacting the company’s financials.
  • The company faces vulnerability to cyclical downturns in the global capital expenditure cycle, given its products’ long lifespan of 20-30 years, as a sharp decline in global capex demand could result in diminished demand, particularly in energy, steel, chemicals, fertilizers, aviation, and construction industries.
  • Inox India Limited relies heavily on a limited number of private and public customers and projects for its major revenue streams, making its financial performance susceptible to fluctuations in these key areas.
  • The company’s significant dependence on export sales exposes it to potential challenges in international markets, including geopolitical and economic uncertainties.
  • Adverse shifts in component, raw material, or other input costs may negatively impact the pricing and supply of Inox’s products, potentially affecting its profitability.
  • Given the inherent risks associated with cryogenic gases stored at very low temperatures, any leakage poses health hazards, adding a crucial safety dimension to the company’s operations.
  • Inox India Limited’s exposure to performance guarantees introduces a potential negative impact on its business, emphasizing the importance of managing contractual obligations effectively.

    PARTICULARS FY23 FY22 FY21
    EBIDTA 204 168 135
    EBIDTA Margin (%) 21.2% 21.4% 22.7%
    PBT 205 174 131
    Adjusted PAT 153 130 96
    EPS 16.8 14.4 10.6
    ROCE 38% 32.4% 31.9%
    EV/Sales 6.1 7.6 10
    EV/EBIDTA 29 35.4 44.1
    P/E 39.5 44.3 64.4

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Z47 Launches $400M Fund for India's Tech Boom
Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - December 14, 2023

India Shelter Finance Corporation IPO: A dive into the affordable housing champion

India Shelter Finance Corporation IPO: A dive into the affordable housing champion
India Shelter Finance Corporation Limited – IPO Note

Price Band: Rs 469-493

Issue Date: 13th Dec-15th Dec

Recommendation: Apply

Company Overview: 

India Shelter Finance Corporation Limited (ISFCL), established in 1998, specializes in housing finance, targeting the self-employed in low and middle-income groups, especially in Tier II and Tier III cities. The company provides various housing finance products, emphasizing loans with ticket sizes below Rs. 10.5 lakhs. With a presence in 15 states and a branch network of 203 as of September 2023, ISFCL focuses on affordable housing, leveraging a scalable technology infrastructure for operational efficiency. The company’s strategic approach includes generating relatively high yields on advances, contributing to financial sustainability and profitability. ISFCL’s mission aligns with promoting homeownership and addressing the specific housing needs of its target demographic.

The Objective of the Issue:

  • ISFCL aimed to raise Rs 1,200 crore through the IPO, with Rs 800 crore through a fresh issue of shares and Rs 400 crore through an offer for sale (OFS) by existing investors.
  • The fresh raised capital will be used to strengthen ISFCL’s capital base and cater to its onward lending requirements, supporting future growth and expansion plans.
  • A portion of the funds may also be utilized for general corporate purposes like debt repayment, working capital needs, and potential acquisitions.

Outlook and Valuation:

  • ISFCL’s robust financial performance, experienced management team, and focus on social impact provide a strong foundation for future growth.
  • The Indian affordable housing market is expected to grow at a healthy pace, driven by government initiatives and rising urbanization.
  • ISFCL’s extensive reach and focus on Tier II and Tier III cities position them well to tap into this market potential.
  • With a loan book standing at Rs. 4,359 Crores as of FY23, ISFCL demonstrates a substantial growth runway given its potential for accelerated expansion. The company has exhibited remarkable growth in Assets Under Management (AUM), achieving a commendable CAGR of 41% from FY21 to FY23. Additionally, ISFCL has delivered a respectable Return on Assets (ROA) of 4.1% in FY23.
  • Despite its robust performance, the company’s valuation, based on Price-to-Book (P/B), indicates a discount compared to peers, standing at 2.6x FY23 post-issue Book Value Per Share (BVPS).
  • Analyzing the company’s Price-to-Book Value (P/BV) of 3.48x and Price-to-Earnings (P/E) ratio of 27.7x, we observe a fair valuation that aligns with its growth prospects and risk profile. This balanced valuation underscores the company’s potential for sustained growth and presents a compelling investment opportunity.
    ISSUE OFFER  
    Price band (INR) Rs 469-493
    Bidding date 13-15 December
    Sector NBFC
    Total IPO size (Cr) 1200
    Fresh issue (Cr) 800
    Offer for sale (Cr) 400
    Market lot 30
    Face value (INR) 5
    Listing on NSE, BSE
    Retail Allocation 35%

Competitive Strengths:

  • Extensive and Diversified Physical Distribution Network with Significant Presence in Tier II and Tier III cities.
  • Targeting this underserved segment aligns with their social mission and creates a loyal customer base.
  • A track record of steady growth in loan portfolio, revenues, and profitability inspires investor confidence.
  • Strong loan book with low non-performing assets (NPAs) minimizes risk and ensures financial stability.
  • Established by the government of India, ISFCL benefits from a stable shareholder base and potential access to cheaper funds.
  • Over 200 branches across 17 states provide a strong physical presence and customer access.
  • Deep knowledge of Tier II and III markets and local lending practices allows for customized solutions.
  • Efficient Technology Adoption: Leverage digital platforms for loan processing and customer service, improving speed and cost-effectiveness.
  • Commitment to affordable housing promotes financial inclusion and poverty alleviation, boosting brand image.
  • Implement green practices and ethical lending policies, further enhancing positive perception.

Key Strategies:

  • Expand and diversify the distribution network to achieve deeper penetration in key states.
  • Strengthen market presence through strategic expansion in targeted regions.
  • Utilize the existing technology stack to achieve scalability.
  • Enhance efficiency and productivity across branches through innovative technological solutions.
  • Diversify the borrowing profile to optimize borrowing costs.
  • Explore a mix of funding sources for financial stability and risk mitigation.
  • Focus on optimizing borrowing costs for improved financial performance.
  • Strategically manage expenses related to borrowing to enhance overall financial efficiency.
  • Invest in initiatives to enhance brand equity in the affordable housing finance sector.
  • Build a strong and reputable brand to foster customer trust and loyalty.
  • Prioritize sustainability initiatives in business practices.

Key Concerns:

  • Economic downturns increase the risk of non-payment or default by borrowers, particularly from the low-income segment.
  • Customers in the low and middle-income strata, especially first-time home loan takers in Tier II and Tier III cities, may face challenges in meeting repayment obligations during economic uncertainties.
  • ISFCL’s customer base comprises 30% salaried and 70% self-employed individuals.
  • Intense competition, especially in the context of expansion into new geographies, may impact ISFCL’s financials in the long term.
  • Differing market dynamics, regulatory landscapes, and customer needs in new geographies may pose challenges.
  • A major proportion of ISFCL’s Assets Under Management (AUM) is concentrated in three states, posing geographic concentration risk.
  • Over-reliance on specific regions increases vulnerability to localized economic conditions.
  • Historical negative cash flows and the potential for future negative cash flows are inherent to ISFCL’s business model.

Comparison with Listed Industry Peers: 

FY23 FIGURES ISFCL Aavas Aptus Home first finance
FY21-23 AUM CAGR (%) 41 22 29 32
AUM (Rs Cr) 4,359 14,167 6738 7198
Yield 14.9% 13.1% 17.1% 13.1%
Spreads 6.6% 5.5% 8.9% 5.7%
Credit cost 0.5% 0.1% 0.5% 0.3%
GNPA 1.1% 0.9% 1.2% 1.6%
ROA 4.1% 3.5% 7.8% 3.9%
ROE 13.4% 14.1% 16.1% 13.5%
P/E 34 28.8 26.7 32.6
NAV 141.38 67.05 413.58 206.48
PARTICULARS FY23 FY22 FY21
Equity share capital 437.65 437.07 429.78
Other equity 11967.63 10324.20 8942.91
Net worth 12405.28 10761.27 9372.69
Total Borrowings 28123.35 18834.11 14090.67
Revenue from Operations 5029.46 3736.16 2745.72
EBIDTA 4188.31 3208.59 2226.3
PBT 2019.52 1669.01 1129.57
Net profit 1553.42 1284.47 873.89

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RBI Charts Course for Sustainable Growth: Inflation Control as the Key

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LG Electronics’ India unit IPO: valuation, strategy and sector implications
Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - December 14, 2023

DOMS Industries IPO Note: A deep dive into the leading stationery player

DOMS Industries IPO Note: A deep dive into the leading stationery player
DOMS Industries Ltd – IPO Note
Price Band: Rs. 750-790
Issue Date: 13th Dec-15th Dec
Recommendation: Apply

Overview: 

Established in 2006, DOMS Industries Ltd is a prominent player in the stationery and art products market. With a strong focus on research, development, and backward integrated manufacturing, DOMS has gained significant market presence both domestically and internationally, spanning over 45 countries. The company holds the second-largest market share (by value) in India’s branded stationery and art products market, boasting around 12% as of FY23. DOMS Industries Limited specializes in the design, development, and sale of stationery and art products, categorized into seven segments, including scholastic stationery, scholastic art material, paper stationery, kits and Combos, office equipment, hobbyist and craft items, and artistic supplies are all available.

Company Profile:

  • DOMS Industries has established itself as one of the globally recognized entities with such a comprehensive product portfolio in the ‘stationery and art material’ sector.
  • Under its flagship brand ‘DOMS’ and other associated brands like ‘C3,’ ‘Amariz,’ and ‘Fixyfix,’ the company effectively markets its diverse range of products. Manufacturing operations are conducted at facilities situated in Umbergaon, Gujarat, and Bari Brahma in Jammu and Kashmir.
  • With an expansive multi-channel distribution network, DOMS Industries has secured a robust pan-India presence and a global footprint, serving over 45 countries across the Americas, Africa, Asia Pacific, Europe, and the Middle East.

The Objective of the Issue:

  • Total issue amount: Rs 1,200 Crores, comprising a fresh issue of Rs 350 Crores and an offer for sale of Rs 850 Crores by promoters.
  • Utilization of fresh issue proceeds:
  1. Financing the construction of a new manufacturing facility.
  2. Expanding DOMS’ production capabilities for writing instruments, watercolor pens, markers, and highlighters.
  3. Allocation for general corporate purposes.
  • A proposal to partially finance the cost of establishing the new manufacturing facility.

Outlook and Valuation:

  • DOMS Industries exhibits robust revenue growth, healthy profit margins, and superior return ratios when compared to industry peers.
  • The company stands to benefit from increasing literacy rates, a growing student population, and rising disposable income in India, creating a favorable market environment.
  • DOMS is a trusted and reputable name in the Indian market, offering a combination of quality products and affordability, which enhances its position among consumers.
  • DOMS maintains a strong commitment to research and development, staying ahead of industry trends by regularly introducing new and innovative products to the market.
  • The upcoming new manufacturing facility is expected to significantly boost production capacity. This strategic move positions the company well to meet the growing demand for its products, aligning with market trends and customer needs.
  • The company has demonstrated strong financial performance, with a Compound Annual Growth Rate (CAGR) of 23% for revenue and 42% for Profit After Tax (PAT) between FY20 and FY23.
  • The issue is valued at 46 times the FY23 Earnings Per Share (EPS) and 33 times the annualized H1FY24 EPS, suggesting what is perceived as fair valuation.
  • The company’s valuation metrics reveal a substantial market assessment, with an EV/EBITDA ratio of 38.6. Additionally, the Price-to-Earnings (P/E) ratio stands at 32.9.

    ISSUE OFFER  
    Price band (INR) 750-790
    Bidding date 13th Dec-15th Dec
    Sector Stationary
    Total IPO size (Cr) 1200
    Fresh issue (Cr) 350
    Offer for sale (Cr) 850
    Market lot 18
    Face value (INR) 10
    Listing on NSE, BSE
    Retail Allocation 10%

Competitive Strengths:

  • Strong brand recognition in India, especially in smaller towns and rural areas.
  • Extensive portfolio caters to various needs, from basic school supplies to professional art materials.
  • Robust distribution network present in over 45 countries.
  • Regular introduction of new and improved products to stay ahead of trends.
  • Vertical Integration: 13 manufacturing facilities across India for cost control and quality assurance.
  • Optimized logistics and inventory management for faster delivery and reduced waste.
  • Experienced personnel ensure high-quality production.
  • Sustainable Practices: Commitment to environmental responsibility enhances brand image.

Key Strategies:

  • Doms has a strong brand recognition, Leveraging trust in “DOMS” across India.
  • Expanding portfolio: From school supplies to professional art materials.
  • It has a Wide distribution network, reaching consumers and retailers in India and 45+ countries.
  • Continuous innovation: Introducing new products to stay ahead of trends.
  • Vertical integration: 13 manufacturing facilities for cost control and quality assurance.
  • Faster deliveries, reduced waste, and improved costs.
  • Skilled workforce: High-quality production and sustained success.
  • Enhancing brand image and resonating with eco-conscious consumers.

Key Concerns:

  • DOMS Industries has a notable dependency on FILA Group, particularly for export sales, with FY23 export sales to FILA amounting to Rs. 159 Cr. This constitutes 12.9% of total sales and a significant 61.6% of export sales.
  • The company faces a potential risk due to the substantial concentration of its major product category, Wooden Pencils, which accounts for approximately 32% of total sales. Any decline in the sales of wooden pencils could adversely impact the company’s overall revenue.
  • In the competitive industry landscape, effective competition is crucial for DOMS. Inability to compete effectively may lead to adverse effects on business performance, operations, and profitability.
  • The company’s strategic approach involves acquisitions, posing a potential risk. Inability to manage the expansions resulting from these acquisitions may have a material adverse effect on DOMS’ business operations, impacting financial results negatively.
  • DOMS relies significantly on key products, particularly wooden pencils, for a substantial portion of its Gross Product Sales.
  • The ‘general trade’ distribution network plays a vital role for DOMS, accounting for more than 70.00% of its Gross Product Sales.
  • FILA, a promoter of DOMS, is crucial for the company’s business operations and research and development (R&D) capabilities.
  • Operating in a competitive business environment, DOMS faces competition from both organized and unorganized players.
  • The company’s dependence on natural resources for raw materials and potential pricing pressure from suppliers are additional factors influencing its operational landscape.

Comparison with Listed Industry Peers: 

FY23 FIGURES DOMS KOKUYO CAMLIN LTD LINC LTD FLAIR WRITING INSTRUMENTS
Revenue 1212 775 487 943
CAGR (20-23) 22.8% 6.9% 7.4% 18.0%
EBIDTA Margin 15.4% 7.0% 12.6% 19.5%
ROCE % 33.1% 12.0% 31% 33.4%
ROE % 28.9% 9.3% 21.1% 31.4%
Debt/equity 0.3 0.2 0 2.5
EV/EBIDTA 26.4 27.0 20.1 22.9
P/E 46.6 57.4 33.2 34.3

 

PARTICULARS FY23 FY22 FY21
Equity share capital 3.73 3.73 3.73
Other equity 3370.59 2468.74 2332.38
Net worth 3553.45 2580.94 2416.79
Total Borrowings 151.55 28.52 28.99
Revenue from Operations 12118.90 6836.01 4028.17
EBIDTA 1866.60 697.13 300.25
PBT 1387.63 240.24 (75.78)
Net profit 1028.71 171.40 (60.26)

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RBI Charts Course for Sustainable Growth: Inflation Control as the Key

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Peerless Group to Exit Insurance Distribution and Double-Down on Hospitals
Business, Equities, Expert Views, Investor Forum, Market News, Markets, Research, Research Reports, Result Updates - December 14, 2023

Digital Services Propel Zensar's Q2 Growth to 1,240 Cr

Digital Services Propel Zensar’s Q2 Growth to 1,240 Cr

Company Name: Zensar Technology Lyd | NSE Code: ZENSARTECH | BSE Code: 504067 | 52 Week high/low: 578/202 | CMP: INR 519 | Mcap: INR 11,751 Cr | PE: 22.4

Company Overview:

Zensar Technology, a member of the RPG group, specializes in providing IT services and solutions. The company’s offerings encompass experience services, advanced engineering services, data engineering and analytics, application services, and foundation services. Zensar focuses on industry verticals such as Hitech & Manufacturing, Consumer Services, Banking & Financial Services, and Insurance.

Business Segment: Digital Application & Digital Foundation Services

Digital Application services contribute 81.8% to the company’s revenue, including custom applications management services spanning development, maintenance, support, modernization, and testing across various technologies and industry verticals. Digital Foundation services make up the remaining 18.2%, offering infrastructure management services through a managed service platform employing automation, autonomics, and machine learning.

Moderate Revenue as Hitech and Healthcare Verticals Decline

The revenue exhibited stability, experiencing a marginal 0.5% year-over-year (YoY) growth and a more notable 1.11% quarter-over-quarter (QoQ) increase, reaching 1,240 Cr. This performance was influenced by a slowdown in sectors like Hitech and Healthcare. Notably, Banking and Financial Services demonstrated a robust sequential QoQ revenue growth of 3.1% and an impressive quarterly YoY growth of 7.8% in constant currency.
On the other hand, Manufacturing and Consumer Services showcased a noteworthy sequential QoQ growth of 6.7%, but experienced a slight quarterly YoY decline of 0.7% in constant currency. In contrast, Hitech and Healthcare encountered challenges, with an 8% QoQ decline (-16.9% YoY) and a 1.5% QoQ decrease (-4.7% YoY) respectively.

Geographical Revenue Breakdown in Q2FY24

South Africa experienced a 7.9% QoQ growth in constant currency, contributing 12.2% to total revenue. UK/EU exhibited an 11.3% QoQ growth, representing 21.6% of total revenue. The USA, despite being the major contributor at 66.2%, reported a 4.3% QoQ decline in revenue.

Client Concentration Risk Reduction

In Q2FY24, the top 5 clients accounted for 31.5% of total revenue, compared to 34.6% in Q2FY23. Similarly, the contribution of the top 10 clients decreased from 45.5% in Q2FY23 to 42.2% in Q2FY24, and the top 20 clients contributed 58.3% in Q2FY24 compared to 60.7% in Q2FY23. This indicates a decline in revenue concentration among the top clients, suggesting a positive trend for revenue growth.

Services Performance in Q2

On a QoQ basis, Advanced Engineering Services recorded a growth of 7.8%, Experience Services grew by 3.1%, Application Services and Enterprise Application Services grew by 0.2%, while Foundation Services remained flat. Data Engineering and Analytics experienced a decline. These key service lines collectively constituted 34.0% of total revenues.

Valuation and Key Ratios

Currently, the stock trades at a multiple of 22.4x earnings per share (EPS) (TTM) of 23.2 Rs, with a market price of 519 Rs. The company’s stock is valued at 3.63 times its book value of 144 Rs per share. In EV/EBITDA, the company ranks 7th with a multiple of 12.53x, compared to the industry median of 17.37x. The trailing twelve-month return on equity (ROE) and return on capital employed (ROCE) stand at 11.2% and 14.5%, respectively. The interest coverage ratio is robust at 28.4x, indicating the company’s solvency.

Q2FY24 Result Update: Consolidated

➡️In Q2FY24, revenue remained moderate, growing 0.5% YoY (+1.11% QoQ) to 1,240 Cr due to the slowdown in the Hitech and Healthcare verticals.

➡️EBITDA surged 119.07% YoY (+0.35% QoQ) to 230 Cr, driven by a decline in operating expenditure. The EBITDA margin expanded significantly by 1000 bps YoY to 18.61%.

➡️Operating profit (EBIT) increased by 245.73% YoY (+3.46% QoQ) to 194 Cr, with an EBIT margin jumping by 11.1% YoY and 36 bps QoQ to 15.66%.

➡️Profit after tax (PAT) saw a remarkable surge of 206.16% YoY (+11.3% QoQ) to 174 Cr, and the PAT margin expanded by 940 bps YoY and 130 bps QoQ to 14.02%.

➡️Earnings per share (EPS) for the quarter stood at 7.69 Rs, compared to 6.91 Rs in the previous quarter.

Conclusion

Zensar Technology reported stable Q2FY24 results with a 0.5% YoY revenue increase, despite challenges in Hitech and Healthcare sectors. The company demonstrated resilience in diversified geographical and client revenue streams. Notable growth in EBITDA, operating profit, and PAT reflects operational efficiency, contributing to positive market valuation and improved financial ratios.

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Beyond GDP: Understanding the disconnect between economic growth and consumer confidence in India

Beyond GDP: Understanding the disconnect between economic growth and consumer confidence in India
Introduction:

India has experienced strong GDP growth in recent quarters, reflecting positive economic fundamentals. However, the RBI’s surveys on consumer confidence indicate a discrepancy between these macroeconomic indicators and the sentiments of the average consumer. Understanding this incongruity is crucial for policymakers, businesses, and investors to make informed decisions in navigating the economic landscape.

RBI surveys:

Recent surveys conducted by the Reserve Bank of India (RBI) have revealed a surprising disconnect between the nation’s strong economic growth and the sentiments of urban consumers. While the Indian economy has been showcasing robust growth, with a GDP of 7.8% in the June 2023 quarter and 7.6% in the September quarter, consumer confidence seems to be lagging behind. This report aims to analyse this disconnect and explore its potential implications.

The latest RBI Consumer Confidence Survey reports a stable consumer confidence index at 92.2, indicating a consistent economic perception. Despite increased pessimism about current economic conditions, optimism grows regarding current income levels, reaching the highest since July 2019. Compared to September 2023, the overall consumer confidence remains unchanged, showing positive shifts in income and spending but lingering negativity in price levels, economic situation, and employment. Looking ahead, the one-year consumer confidence index reflects positive sentiments in income and spending, with a slight dip from the previous survey, while concerns persist in price levels, economic situation, and employment.

1. The RBI Inflation Expectations survey:

The RBI Inflation Expectations survey reveals that current inflation perception among households decreased by 20 basis points to 8.2%. Over the fiscal year, expectations dropped by 70 basis points to 8.2%. While the three-month median inflation expectation remains stable at 9.1%, the one-year outlook increased by 20 basis points to 10.1%, yet lower than the start of the fiscal year at 10.5%. The survey indicates widespread anticipation of inflation across various product categories, driven by budgetary pressures. Notably, food products and services play a crucial role in shaping overall inflation expectations. In summary, consumers expect higher inflation in the coming months due to household budget challenges.

2. The RBI’s survey of professional forecasters sayings on GDP:

The RBI’s survey of professional forecasters reveals a 20 basis points upgrade in real GDP growth for FY24 to 6.4%, with FY25 forecast remaining at 6.3%. Despite appearing pessimistic compared to the RBI’s 7% projection for FY24, the forecast ranges from 5.8% to 7.4%. The survey anticipates a 6.0% annual growth in real private final consumption expenditure for FY24 and a more optimistic 7.5% growth in gross fixed capital formation, driven by the government’s robust capex. The November survey also revises the real gross value added (GVA) up by 10 basis points to 6.2%, signalling overall optimism in macroeconomic growth, although the median figure differs from RBI projections.

3. According to an RBI survey of professional forecasters on inflation:

The RBI survey of professional forecasters indicates an expected moderation in inflation, specifically in the Consumer Price Index (CPI). For FY24, annual headline inflation is projected at 5.4%, declining to 4.7% in FY25. The forecast suggests a gradual decrease, with Q3FY24 expected at 5.4%, followed by moderation to 5.2% in the subsequent two quarters. By the end of FY25, headline inflation is anticipated to reach 3.9%, well below the RBI’s 4% target.
Core inflation, excluding certain categories, is seen at 4.3% in Q3 and expected to remain between 4.1% and 4.4% over the following three quarters. The overall trajectory of inflation, driven by core inflation, is on a downward path, providing a more sustainable scenario compared to the cyclical nature of food and fuel inflation.

4. According to the RBI survey of professional forecasters on the external sector:

• Merchandise exports are expected to decline by -7.1% in US dollar terms for FY24, while merchandise imports are likely to fall by -5.4%. The survey does not cover services trade, but potential improvements are anticipated in this area.
• For FY25, there is optimism, with merchandise exports and imports expected to grow by 5.0% and 6.2% respectively. The services trade is expected to show greater traction in FY25.
• The current account deficit (CAD) is projected to be 1.7% of GDP in FY24, decreasing to 1.6% in FY25. Positive prospects for services exports are expected to contribute favourably to the current account.

Potential Reasons for the Disconnect:

1. Unequal Distribution of Gains: The benefits of strong GDP growth may not be evenly distributed among various income groups, contributing to a sense of economic inequality.
2. Perceived Job Insecurity: Even with economic expansion, concerns about job security and underemployment may be prevalent, influencing consumer sentiment.
3. Inflationary Pressures: Rising inflation rates can erode the purchasing power of consumers, affecting their confidence in making discretionary purchases.
4. Psychological Factors: Consumers may be hesitant to spend due to global uncertainties or geopolitical tensions.

Implications for the economy:

• Policy Considerations: Policymakers need to consider measures that address the concerns of individual consumers, such as targeted economic policies, social safety nets, and employment generation initiatives.
• Business Strategy: Understanding the consumer sentiment disconnect is essential for businesses to tailor their strategies, marketing, and product offerings to align with consumer expectations and economic realities.
• Investor Caution: Investors should be mindful of the potential impact of muted consumer confidence on certain sectors, adjusting their investment strategies accordingly.

Conclusion:

The findings from the RBI surveys highlight the importance of addressing the divergence between strong GDP growth and consumer confidence. A holistic approach involving targeted policies, business strategies, and investor awareness is essential to bridge this gap and ensure that the benefits of economic growth are felt at the individual consumer level. The coming months will be critical for stakeholders to collaborate and implement measures that foster inclusive economic growth and enhance consumer well-being.

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Policy watch: RBI holds rates, Moderates growth forecast for 2024

Policy watch: RBI holds rates, Moderates growth forecast for 2024
Introduction:

The Reserve Bank of India (RBI) has concluded its latest monetary policy review with a cautious yet optimistic stance as the country prepares to welcome the New Year. The central bank, while remaining vigilant to emerging economic challenges, has taken steps to support growth and maintain stability in the financial system. This report provides an overview of the key highlights from the recent RBI policy announcement and analyses the potential implications for the Indian economy in the coming year.

As the global economic landscape continues to evolve amid ongoing uncertainties, central banks play a crucial role in shaping monetary policies that balance growth objectives with inflation control. The RBI, in its recent policy review, has demonstrated a nuanced approach that seeks to address the challenges faced by the Indian economy while fostering a positive outlook for the upcoming year.

Key Highlights of the RBI Policy:

 Repo Rate Unchanged at 5.9%: The RBI has decided to keep the repo rate unchanged at 5.9%, signalling a steady approach to monetary policy. This move aims to provide stability to the financial markets while supporting economic recovery.
 Policy Stance remains “Withdrawal of Accommodation”: The central bank has maintained its policy stance, signalling a commitment to gradually withdrawing accommodative measures. This decision suggests a cautious approach, balancing the need for economic support with concerns about potential inflationary pressures.
 Inflation Projected to Moderate to 4% in Q4 FY24: The RBI’s inflation outlook anticipates a moderation to 4% in the fourth quarter of the fiscal year 2023-24. This projection reflects the central bank’s attention to inflation dynamics and its efforts to ensure price stability in the economy.
 Growth Forecast Revised Downward to 6.8% for FY24: In response to evolving economic conditions, the RBI has revised its growth forecast downward to 6.8% for the fiscal year 2023-24. This adjustment acknowledges the challenges faced by the economy while providing transparency about the central bank’s expectations.
 Focus on Maintaining Financial Stability: The policy highlights underscore the RBI’s commitment to maintaining financial stability. This includes efforts to strengthen regulatory frameworks, enhance risk management practices, and ensure the resilience of the financial system in the face of potential disruptions.
 RBI to Remain Vigilant and Monitor Evolving Economic Situation: The central bank has reiterated its commitment to vigilance, emphasizing its role in closely monitoring the evolving economic situation. This proactive stance indicates a readiness to respond to changing conditions, ensuring that policy measures remain adaptable to emerging challenges.

Market Reaction:

The Indian stock market initially reacted positively to the policy announcement, with the benchmark BSE Sensex index rising over 2%. However, the gains were short-lived, and the market ended the day flat.

RBI’s Stance on Liquidity and Market Impact:

Despite refraining from introducing fresh liquidity measures, the Reserve Bank of India (RBI) has emphasized its agility in liquidity management and maintained the possibility of utilizing policy tools like Open Market Operations (OMO) Sales. The absence of unexpected announcements led to a firming of the 10-year sovereign bond yield, reaching 7.26%, while the equity markets closed just below the 21,000 marks.

The central bank’s decision to hold off on new liquidity measures signals a measured approach, suggesting a current satisfaction with prevailing market conditions. However, the emphasis on nimble liquidity management underscores the RBI’s preparedness to adapt to changing economic circumstances. The mention of OMO Sales being “not off the table” implies that the central bank retains flexibility, ready to deploy additional measures when warranted.

The market response was notable, with the 10-year sovereign bond yield experiencing upward pressure, indicating a revaluation by investors in light of the absence of immediate liquidity injections. Concurrently, equity markets closed marginally below 21,000, reflecting a cautious sentiment among market participants. The reactions suggest that investors are carefully assessing the implications of the RBI’s decision and its potential impact on economic and market conditions.

Conclusion:

In conclusion, the RBI’s recent monetary policy review strikes a careful balance between supporting economic recovery and addressing inflation concerns. Maintaining the repo rate at 5.9% provides stability, while the decision to withdraw accommodative measures reflects a cautious approach. The downward revision of the growth forecast to 6.8% acknowledges economic challenges.
Market reactions indicate investor scrutiny, with a brief surge followed by a flat close. The RBI’s commitment to financial stability and its readiness to deploy liquidity measures position the economy for resilience. As India enters the New Year, the central bank’s nuanced stance sets the stage for stability and growth amid evolving economic conditions.

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Anticipation and Trends: Insights into Asian stock markets amid US inflation release

Anticipation and Trends: Insights into Asian stock markets amid US inflation release
Introduction:

Asian stock markets experienced a positive trend in the latest trading session as investors cautiously awaited the release of US inflation data. The anticipation surrounding the inflation figures contributed to a mix of optimism and caution among market participants, leading to a modest but noticeable uptick in stock prices across the region.

Market Overview:

Asian Markets:
Major Asian stock indices, including the Nikkei 225 in Japan, the Hang Seng Index in Hong Kong, and the Shanghai Composite in China, displayed gains during the trading session. This upward movement was attributed to a variety of factors, such as positive economic data from the region and a sense of optimism stemming from global recovery efforts.

US Inflation Data:

The key driver of market sentiment during this period was the impending release of US inflation data. Investors closely monitored these figures as they are crucial in shaping expectations for future monetary policy decisions by central banks. The US Federal Reserve has consistently emphasized its commitment to an accommodative monetary stance, and any surprises in inflation figures could influence these policy considerations.

Asian stocks rise ahead of US inflation numbers:

Asian stocks inched up cautiously on Tuesday, with investors awaiting a crucial US inflation report that could influence the Federal Reserve’s policy outlook. The MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.49%, while the Japanese Nikkei gained 0.36%. Australia’s S&P/ASX 200 index was the top performer, climbing 0.61%.

The market’s cautious optimism was fueled by the expectation that US inflation may have peaked. Investors are hoping that the US Consumer Price Index (CPI) data released later today will show a decline in the headline inflation rate from 3.3% in October to 3.7%. A lower-than-expected reading could ease concerns about aggressive interest rate hikes from the Fed, boosting risk appetite.

However, the market sentiment remains fragile as a higher-than-expected inflation reading could lead to further tightening by the Fed, impacting global economic growth. Additionally, investors are also watching out for other central bank meetings this week, including the European Central Bank, Bank of England, Norge’s Bank, and the Swiss National Bank.

Regional Highlights:

Japan: The Nikkei 225 edged up 0.36%, supported by gains in technology and consumer discretionary stocks. However, the gains were capped by a weaker yen, which fell to a one-year low against the US dollar.
China: Mainland China’s blue-chip CSI 300 index edged down 0.28%, while the Hong Kong Hang Seng index fell 0.20%. Investors remained cautious amid concerns about the slowing Chinese economy and the lack of clear policy support from the government.
Australia: The S&P/ASX 200 index rose 0.61%, led by gains in energy and materials stocks. The market sentiment was boosted by positive earnings reports from major companies and rising commodity prices.
South Korea: The KOSPI index gained 0.33%, supported by gains in tech and healthcare stocks. Investor sentiment was also lifted by expectations of a slower pace of interest rate hikes from the Bank of Korea.

Market Sentiment Influencing Factors:

1. Global economic recovery: The continuous global economic recovery, fueled by vaccine rollouts and fiscal stimulus measures, offered a positive backdrop for equity markets. Positive economic indications from major economies, such as solid manufacturing data and improved employment figures, aided the general positive sentiment.

2. Central Bank Policies: Investors closely monitored central bank announcements for any indications of prospective monetary policy adjustments. The Federal Reserve’s stance on interest rates and asset purchases remained a focus, and any signals of a policy shift might have an influence on market dynamics.

3. Geopolitical developments: While geopolitical concerns were not the primary focus, continuing events and developments in many countries, such as trade talks and diplomatic ties, influenced market mood to some extent.

Conclusion:

Asian stocks rose cautiously in anticipation of US inflation data, reflecting a mix of optimism and caution. The expectation of a potential decrease in US inflation boosted market confidence, but fragility remains amid concerns about aggressive Fed actions. Regional highlights showed varied performances, influenced by factors like currency dynamics and regulatory uncertainties. Overall, investors are navigating a nuanced landscape shaped by global economic recovery, central bank policies, and geopolitical events, requiring vigilance and adaptability.

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Paper Price Surge Hits Q2 Profits: Navneet Education Adapts with Price Adjustments

Paper Price Surge Hits Q2 Profits: Navneet Education Adapts with Price Adjustments

Company Name: Navneet Education Ltd | NSE Code: NAVNETEDUL | BSE Code: 508989 | 52 Week high/low: 176/88.1 | CMP: INR 143 | Mcap: INR 3,231 Cr | PE: 26.5

Company Overview:

Navneet Education is a key player in the manufacturing and trading of educational books, reference materials, and stationery, with a significant market presence in both paper and non-paper categories. The company commands a dominant market share of 65% in western India and exports its stationary products to over 30 countries, with a focus on the US. Navneet Education operates three manufacturing sites in Dadra & Nagar Haveli, Palghar, and Gandhinagar.

Paper Price Surge Causes 20% Quarterly Revenue Drop:

In Q2FY24, the company experienced a 20% quarter-on-quarter (QoQ) revenue decline, primarily attributed to a surge in paper prices. The quarterly revenue plummeted by 66.42% year-on-year (YoY) and 19.41% QoQ due to increased paper costs. To counteract this rise, the company raised prices on some publication products, leading to decreased demand. Furthermore, changes in the paper pattern for certain standards resulted in the postponement of related examination book releases to the third quarter.

Resilient Stationary Business in Q2:

Despite challenges in the publication segment, the stationary business demonstrated resilience with a marginal decline of 0.79% QoQ and a substantial 46.65% YoY decrease. The domestic stationary market usually performs well in Q4 and Q1, and the company anticipates achieving a growth of 12%-15% in this segment for FY24. In H1FY24, the overall stationary business recorded revenue of Rs. 547 crores and EBIT of Rs. 71 crores, reflecting a margin of approximately 12.9%.

Segment-Wise Performance in Q2:

For Q2, consolidated revenue contracted by 66.42% YoY, reaching 266 Crores, primarily due to the slowdown in the publication business. The publication segment was significantly impacted, with an 83.08% YoY decrease in revenue to 73 Crores, while the stationary business remained resilient, declining by 0.79% QoQ and 46.65% YoY to 190 Crores.

Valuation and key ratio

As of now, the stock trades at a multiple of 26.5x earnings per share (EPS) (TTM) of 10.4 Rs, with a market price of 143 Rs. The industry price-to-earnings (PE) ratio is at 28.7x. The company’s stock is valued at 2.54 times its book value of 56.3 Rs per share. In terms of enterprise value/earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), the company ranks 6th with a multiple of 11.39x, compared to the industry median of 18.11x. The trailing twelve-month return on equity (ROE) and return on capital employed (ROCE) stand at 15% and 19.4%, respectively, with a healthy interest coverage ratio of 12x.

Q2FY24 Result Update – Consolidated

➡️In Q2FY24, consolidated revenue declined by 66.42% (-19.41% QoQ) to 266 Crores, primarily attributed to challenges in the publication business stemming from the rise in paper prices.

➡️Gross profit decreased by 63.56% YoY, reaching 134 Crores, while gross margin improved by 400 basis points YoY to 50.56%, driven by a decline in raw material costs by 68.91% YoY.

➡️EBITDA experienced a significant downturn, decreasing by 102.06% YoY to -4.30 Crores, mainly due to challenges in the publication business. EBITDA margin stood at -1.62% in Q2FY24 compared to 26.39% in Q2FY23.

➡️Operating profit (EBIT) decreased by 109.65% YoY to -18.9 Crores in Q2FY24, with an EBIT margin of -7.11%, contrasting with 24.74% in Q2FY23.

➡️Profit after tax (PAT) decreased by 75.44% YoY to 35.6 Crores, supported by a one-time gain from the sale of a plant worth 68 Crores. PAT margin dropped by 500 basis points YoY to 13.39%.

➡️Earnings per share (EPS) for the quarter stood at 1.58 Rs, a significant improvement compared to -0.10 Rs in the previous quarter.

Conclusion:

Navneet Education faced significant challenges in Q2FY24, marked by a substantial decline in consolidated revenue, primarily attributed to the impact of rising paper prices on the publication business. While the stationary segment exhibited resilience, the company navigated the downturn by adjusting prices and strategizing for a rebound. The focus on cost management, evident in improved gross margins, showcases the company’s adaptability. With a strong market presence and strategic manufacturing capabilities, Navneet Education aims to overcome challenges, emphasizing growth prospects in the stationary business for the remainder of FY24. Investors should monitor the company’s efforts to mitigate the impact of external factors on its financial performance.

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