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DB Corp. – Initiating Coverage
DBCL's ad revenue to outpace regional ad growth: During FY2010–13E, we peg DBCL's
ad revenue (excluding radio) to post a 17% CAGR, ahead of industry growth at a 14%
CAGR. Growth will be led by 1) higher ad spends in regional markets, 2) uptick in the
economy, resulting in higher ad volumes and 3) penetration into new geographies.

Despite low focus on circulation, we expect DBCL to outpace industry growth: We expect
circulation revenue to post a 9.3% CAGR over FY2010–13E compared to industry growth
of 5.3% CAGR over the same period. We expect the circulation revenue to be led by ~5%
volume growth and have penciled in average realisation per copy of `1.5 in FY2013E.
Jharkhand and Jammu launches – A good bet in the long term: We expect new launches
to post advertising revenue of `43cr in FY2013. We expect circulation revenue to post an
80% CAGR over FY2011–13E.

Radio to post a 20% top-line CAGR over FY2010–13E: We expect the radio business to
post profit of ~`9cr/`11cr in FY2012E/13E, respectively, at the EBITDA level, aided largely
by 1) synergistic benefits that will be derived from the parent post the merger (expected by
4QFY2011) and 2) shift of royalty rates to revenue sharing, paving way for Phase-III
licenses auction.

Valuations: Our target price is based on 21x FY2013E EPS of `17.0, 5% premium to the
target multiple of its peers, HT Media and Jagran Prakashan. We believe the premium
valuation is justified given 1) the leadership in the vernacular print space in terms of
readership and circulation for consolidated DBCL portfolio, 2) that it is the only Hindi print
play to have a leadership position in non-Hindi state (Gujarat), 3) its well-executed and
maximum number of successful launches, 4) significant reduction in losses in radio
(already achieved breakeven at the operating level) and 5) healthy balance sheet on
account of retirement of debts. We Initiate Coverage on the stock with a Buy
recommendation and a Target Price of `358, based on 21x P/E FY2013E EPS.