>EDUCATION SECTOR: Q4FY12 Results Preview

Growth momentum intact


Education companies are likely to deliver strong results in Q4. However, we expect the companies under active coverage to register 6% growth during Q4FY12 due to unique one-off reasons. While Q4 is seasonly a weak quarter for Navneet, NIIT’s single digit growth stems from the sale of Element K business in Q3 that would lead to lower revenue in Q4. We believe the growth in topline would be largely driven by multimedia solutions to private schools, vocational courses and IT training segments. Within the space, we like Navneet Publication
and NIIT considering attractive valuations, strong topline growth and better prospects of improving their margin profiles in FY13E.


■ Topline growth to continue: We expect the growth momentum to continue for companies given the opportunity in the space and also because Q4 is seasonally a better quarter. Segments including multimedia solutions to private schools and IT training business would be key drivers. In case of Navneet, Q4 is seasonally a weak quarter. NIIT (excluding corporate learning solution) is likely to register 12% YoY growth.


■ Operating margin to decline on one-offs: NIIT would witness subdued margin as the individual learning segment is in the process of integration. We believe that NIIT would see margin expansion in FY13E on the back of better sales mix in favour of individual learning solutions and school learning solutions.


■ Prefer Navneet Publication and NIIT in the space: We prefer NIIT in the space considering attractive valuations and prospects of margin expansion in FY13E. Within the Publication space, we like Navneet Publciation given its strong growth momentum for FY13E/14E and margin expansion and improvement in return ratios.




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