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CD Equisearch
Navneet Education (Buy)
CMP: ₹98.20
Target: ₹133
Ambitious plans have been set for the Indian education industry under the current Five Year Plan to close the education gap (measured by mean years of schooling) with other emerging economies such as China (8.17 years vs 5.12 years for India) and Brazil (7.09 years).
Navneet’s B2B business (read: e-learning) has made a decent headway viz. fivefold increase in empanelment in the last four years, by astonishing success of its B2B product ‘Topclass’. Other path-breaking initiative include penetration in B2C market (read: sale of tablets) and foray in direction education space by picking a stake in K12 Techno Services — a school management company.
Earnings would advance annually by some 15 per cent over the next two years supported by syllabus changes and buoyant exports of paper stationery. Yet spectre of earning downgrades arising out of margin erosion in domestic paper stationery business and marginal changes in syllabus looms; not counting growing pressure of input costs.
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