Navneet Publications Ltd (NPL) Q4FY2008 results were ahead of our expectation with net sales growing by a healthy 29.5% year-on-year (y-o-y) to Rs59.1 crore. This was mainly due to growth in publication and stationery businesses.
The publication business witnessed a robust growth of 28.5% y-o-y to Rs21.8 crore. The stationery business achieved a healthy growth of 33.8% y-o-y to Rs38 crore, on good domestic demand and introduction of non-paper stationery products.
The operating profit margin (OPM) declined by 102 basis points to 9%, due higher other expenditure, as the other expenditure.
At the current market price of Rs66.5, the stock is trading at 8.8X its 2010E earnings per share (EPS) and at an EV/ EBIDTA of 5.7X. Considering the fact that the stock has corrected sharply to reasonable levels, we upgrade our recommendation to BUY with a revised price target of Rs80, at which the stock discounts its FY2010 EPS of Rs7.6 by 10.5x.