S.Chand & Company Ltd (SCCL) is a leading text book publisher and operates as an
education content provider in India. The company develops and delivers content,
solutions, and services in the education K-12, higher education, and early learning
segments. It offers 55 consumer brands such as S.Chand, Vikas, Madhuban,
Saraswati, Destination Success, etc. and has strong presence in CBSE, ICSE and State
Board affiliated schools. SCCL’s K-12 segment contributes ~72.5% to the revenue
and the balance is from Higher education and others segments. In terms of valuation, the pre-issue works out to 3.0x of
FY2017E P/BV (at the upper end of the issue price band), which is lower compared to
its peers (Navneet is trading at 6.3x its FY2017E P/BV). Also, SCCLs EV/sales multiple
3.2x is at a discount to Navneet’s 3.7x. On EV/EBITDA front too, SCCL issue appears
to be attractive at 13.4x v/s 16.3x of Navneet. However, the return on invested capital
for S.Chand and Navneet both is in the range of 28-30%. Hence, considering the
company’s leadership position in K-12 market, strong brand recall and pan India
reach along with higher revenue/PAT growth (revenue/PAT grew at a CAGR of
33%/36% over FY2012-16 v/s 11%/7.5% of Navneet), we believe that SCCL is rightly
placed for further growth. Thus, we recommend a SUBSCRIBE on the issue.

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