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Jagran Prakashan |
Slightly below estimates, Reiterate BUY |
BUY
CMP: Rs 129 Target Price: Rs 155
n PAT up 10.4% YoY to Rs555mn, below our estimate of Rs599mn due to lower than expected ad-revenue growth during the quarter
n Advertisement revenue growth was at just 12.7% yoy impacted by floods, Ayodhya verdict and shift of festive season to Q3 in FY11 v/s Q2 in FY10
n Ad-revenue growth fully led by realization growth - mix of yield improvement and rate hike
n Retain EPS estimate of Rs 7.0 and Rs 8.6 for FY11E and FY12E respectively. Retain BUY rating with target Rs 155
PAT of Rs555mn – below estimates on lower ad-revenue growth
Jagran reported Q2FY11 PAT at Rs555mn, below our est. of Rs599mn, due to below
expected ad-revenue growth. Net sales increased by 12.2% YoY to Rs 2.77bn with
advertisement revenues growing by 12.7% YoY, fully driven by realization improvement.
EBIDTA grew by 9.1% yoy with margins falling by 90bps yoy to 32.8%.
Ad-revenue growth fully led by realization improvement
Advertisement revenue growth for the quarter at 12.7% yoy was lower than our estimate
of 20%, affected by (1) floods in the geographies where Jagran operates (2) Ayodhya
Verdict impacting revenues during end September (3) Shift of complete festive season
to Q3 v/s Q2 in FY10. Q2FY11 ad-revenue growth was fully driven by realization growth
constituted by both ad-rate hike and yield improvement (eg: B/W to color). Despite lower
than expected ad-revenue growth in Q2FY11, management continued to maintain its
guidance of 17-18% ad-revenue growth for FY11.
Cover price cuts in Jharkhand takes Jagran’s positioning to #2
Despite the cover price cuts in Jharkhand post the launch by Dainik Bhaskar, the
circulation revenues of Jagran have registered growth of 1% yoy. The company
management in the earnings call indicated that the cover price cuts have helped Jagran
grow its circulation/readership which in-turn has improved its competitive positioning
from #3 to #2 during the quarter.
Circulation to be given a push from Q4FY11
Over the last couple of years, JPL’s flagship daily ‘Dainik Jagran’ has been witnessing
decline in circulation /readership in its key markets of UP. Further the improved financial
strengths of the competitors such as ‘Hindustan’ and their expansion plans have
increased risks of loss of market share. Hence Jagran management has indicated of
emphasizing on increasing circulation in its key markets from Q4FY11, which would
reap benefits in the longer-run.
Retain BUY rating with target price Rs155
We retain our EPS estimates of Rs7 and Rs8.6 for FY11E and FY12E respectively. Our
estimates do not factor the impact of Mid-day acquisition, which we believe is EPS
accretive. We retain BUY rating on the stock with target price of Rs155. At CMP of
Rs129, stock trades at 18.5x /15.1x our EPS estimate for FY11E/12E respectively.
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