Release Date: May 10, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Navneet Education Ltd (BOM:508989, Financial) reported a stable performance despite a challenging environment in the education sector.
- The company's publishing business displayed resilience despite external obstacles, such as increased paper prices and a rise in secondhand book sales.
- The domestic stationery business grew by 7% in FY24, with positive market response to AI-created designs.
- The company is exploring phased introduction of various products in the non-paper stationery segment, indicating future growth potential.
- Navneet Education Ltd (BOM:508989) successfully divested a 5.12% stake in K12 Techno Services, aligning with its value creation strategy and unlocking shareholder value.
Negative Points
- The publishing segment is not expected to see major growth in FY24-25 due to the lack of curriculum changes in core markets like Maharashtra and Gujarat.
- The export stationery segment faced challenges due to the prolonged Red Sea crisis and restrictions in the U.S. market, resulting in an opportunity loss of around INR40 crores.
- Indiannica's performance was below expectations, with higher sales returns and a lack of technology solutions contributing to the poor results.
- The company experienced a 2% reduction in volume sales for the publication business in FY24 compared to FY23.
- The ed tech business incurred significant losses, with a full-year loss of around INR44 crores, including severance costs.
Q & A Highlights
Q: Could you outline your outlook for growth for both the exports as well as the publishing segment given that NEP is not going to be implemented from this year?
A: In FY24-25, we are not expecting major growth in the publishing segment. We anticipate nominal growth due to new title introductions and revisions for higher grades. For export stationery, we are confident of achieving 10-15% growth, driven by increased capacity and customer demand.
Q: For Q4, what would have been the EBIT and the revenue for the publishing segment if the merger with the ed tech business had not taken place?
A: For Q4, the EBIT for the publishing segment would have been around INR18 crores. The revenue would have been similar as the ed tech business is not generating significant revenue.
Q: Can you explain the rationale behind the markdown in SFA this quarter?
A: As per accounting standards, we had to revalue the investment based on revenue, which was lower than last year, leading to a markdown. Despite this, the foundation of the business is strong, with increasing student participation and interest from brands for sponsorships.
Q: Are the 10-15% growth expectations for export stationery or overall stationery, including domestic?
A: The 10-15% growth expectation applies to both export and domestic stationery businesses.
Q: What is the specific use of proceeds from the K12 stake sale?
A: The proceeds will be reinvested in our core business, particularly in expanding the stationery segment, which has significant growth potential both domestically and in exports.
Q: What are the growth expectations for domestic stationery in FY25?
A: We expect domestic stationery to grow between 12% and 15% in FY25, driven by new product introductions and leveraging technology in our offerings.
Q: What is the expected margin outlook for FY25 based on current paper prices?
A: We anticipate margins to improve by around 100 basis points compared to FY24, due to stable paper prices and cost management.
Q: What changes or improvements are planned for the Indiannica business given its underperformance in FY24?
A: We are taking steps to improve logistics, distribution controls, and introducing new titles. We are also addressing the need for technology solutions alongside textbooks to meet school demands.
Q: Why did you decide to sell the stake in K12 despite not needing the cash immediately?
A: The decision was made to fund aggressive expansion in the stationery market without raising debt. We believe this will better support our growth strategy.
Q: What is the expected CapEx for FY25 and FY26?
A: For FY25, we plan to invest around INR40-45 crores in machinery and INR30 crores in building. For FY26, the investment will be around INR70-80 crores in machinery and INR60 crores in building.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
