Navneet Education and Aarti Industries Buy Call by Prabhudas Lilladher
Aarti Industries and Navneet Education has been recommended by research house Prabhudas Lilladher. The target for Aarti Industries is Rs 988. And, for Navneet Education, Prabhudas Lilladher suggests target price of Rs 142.
The research note from Prabhudas Lilladher informs….
Navneet's (NELI) results were above our estimates in a seasonally lean quarter with revenues declining 6.3% YoY to Rs2,468mn (PLe of Rs2,160mn; beat by ~14%). However, after adjusting for the spillover of Rs 600mn in 2QFY19, revenues increased 21.3% YoY aided by strong growth in the stationery segment.
EBITDA declined 31.4% YoY to Rs318mn and was in-line with our estimate with margins declining 470bps YoY to 12.9%. Tax reversals led to 47% YoY growth in PAT to Rs425mn. Given the current quarter performance, we keep our estimates broadly unchanged. Valuations at 9.6x FY20E and 8.3x FY21E appear attractive given 33% bottom line CAGR over FY19-21E, superior return ratios, strong dividend pay-out and narrowing losses in E-sense.
We tweak our estimates to factor in lower revenue growth from 1) lower RM prices 2) demand weakness in auto and US agrochemicals business and 3) lower tax rate. AIL with a diversified product portfolio of 200 products remain well placed to capitalize on rising investment in domestic downstream industries along with global opportunities from US-China trade war. We remain structurally positive on AIL's growth prospects despite near term weakness in growth. Reiterate BUY with a revised price target of Rs988.
Investors should conduct due diligence before investing in stocks. Long term investments usually offer better returns.