Release Date: February 08, 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 consolidated revenue growth of 2.2% for the first nine months of FY24, reaching INR1,316 crores.
- The company's domestic stationery business grew by around 11% to INR257 crores for the nine months of FY24.
- Navneet Education Ltd (BOM:508989) has expanded its reach in the CBSE market, now catering to 11,000 schools compared to 8,500 schools in FY23.
- The company is optimistic about the domestic stationery business, expecting it to grow between 12% to 15% in FY24.
- Navneet Education Ltd (BOM:508989) has introduced new products and is working towards enhancing its digital education solutions, which is expected to drive future growth.
Negative Points
- The publication business faced challenges due to lower-than-anticipated offtake of channel inventory and an increase in the resale of secondhand books.
- The company experienced higher-than-expected sales returns, impacting overall revenue and profitability.
- There is uncertainty regarding the implementation of new curriculum changes by state boards, which could affect future growth projections.
- The export stationery business saw a marginal decline due to supply chain constraints and increased freight costs.
- Navneet Education Ltd (BOM:508989) reported a loss in Q3 FY24, with PAT for the quarter registering a loss of INR22 crores compared to a profit of INR31 crores in the same period last year.
Q & A Highlights
Q: What was the amount transferred from previous quarters in the publication business due to the shift of Gujarat examination books?
A: INR15 crores to INR17 crores were transferred from Q2 to Q3.
Q: What kind of volume de-growth was seen during this quarter, and has the issue of students moving back to older books been addressed?
A: There was around 10% to 12% de-growth in volume over the nine months. The company has revised several products to reduce the volume of books and address the secondhand book market issue.
Q: Can you provide visibility on the implementation of the new curriculum in the state board market and expected growth in FY25 and '26?
A: The company is awaiting curriculum change announcements from state governments. Growth is dependent on these announcements, but the company is prepared to implement changes immediately once announced.
Q: How many more CBSE schools will Navneet cater to in FY24 versus FY23, and what are the key parameters tracked for progress in the CBSE business?
A: Navneet is now catering to 11,000 schools in FY24, up from 8,500 in FY23. Key parameters include the volume of books sold, the number of schools visited, and the effectiveness of sales personnel.
Q: What steps have been taken regarding the potential anti-dumping duty in the USA, and what is the expected impact?
A: The company has arranged to manufacture the affected product category in a neighboring country, expecting to recover the lost volume of around INR40 crores in FY25.
Q: When will the impact of reduction of losses in the Navneet future tech business be seen?
A: Reduction of losses is already seen in the current year. Losses are expected to decrease from INR45 crores in FY24 to around INR30 crores in FY25.
Q: What was the sales return number in this quarter versus expectations, and will this revise provisioning for the next financial year?
A: Expected returns were INR10 crores, but actual returns were around INR18 crores. Provisioning for the next financial year will be revised based on this higher-than-expected return rate.
Q: What is the growth outlook for the publication business in FY25 if no curriculum changes are announced?
A: Without curriculum changes, growth may fall to single digits. However, the company expects to grow due to revisions in products to reduce the use of secondhand books.
Q: How has the market share in the US stationery export market changed over the last three years?
A: The company grew from INR400 crores to INR550 crores in the last three years. Market share as a percentage of US imports from India remains marginal but has increased.
Q: What are the expected margins for FY25, considering the procurement of paper and other factors?
A: If paper prices stabilize, gross margins should return to original levels. EBIT margins depend on achieving growth to cover increasing fixed costs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
