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We initiate coverage on the print media sector with a positive view,
underpinned by strong growth potential of regional media players.
The latest Q2FY11 results support our view on growth in advertising
volumes and yields for the industry. Macro factors such as increase in
penetration and reduction in gap between 'Can Read' and 'Presently
Reading' ensure expansion of the market as a whole.
Currently the print market is Rs190bn in size and is expected to grow at
9% CAGR to Rs225bn by 2012 (2010 KPMG report). We believe this
growth would be fueled by Tier II and Tier III cities owing to increased
consumption across various sectors, FMCG, Real Estate, Automobiles.
During the recent economic slowdown, regional newspapers
outperformed English newspapers, supported by a resilient business
model, higher local content and ad revenue, and a healthy ad:
circulation revenue mix. Our picks in the sector are:
Dainik Bhaskar Corporation Ltd
We expect top line and PAT to grow at 16% and 22% CAGR
respectively over FY10-12. At CMP, the stock trades at 17x FY12E.
We initiate coverage with 'BUY' rating and 12 month target price
of Rs315 (21xFY12E EPS).
Jagran Prakashan Ltd
We estimate sales and PAT to grow at 20% and 22% CAGR
respectively over FY10-12. We initiate coverage with ‘BUY’ rating and
12 month target price of Rs 165 (20x FY12E EPS).
Hindustan Media Ventures Ltd
We expect revenue and PAT to grow at 18% and 35% CAGR
respectively over FY10-12. At CMP, the stock trades at 14x FY12E
EPS (steep discount to current valuations of JPL and DBCL). We
initiate coverage on the stock with ‘BUY’ and 12 month target price of
Rs200 (17x FY12E EPS) - maintaining current discount to the valuation
(targeted P/E) of DBCL (21x FY12E EPS) and to the valuation (targeted
P/E) of JPL (20x FY12E EPS).
Hindustan Times Media Ltd
We expect top line and PAT to grow at 18% and 19% CAGR respectively
over FY10-12. At CMP, the stock trades at 19x FY12E. We initiate
coverage with 'HOLD' with a target price of Rs163 (20xFY12E EPS).
Sector Key Concerns
Newsprint Prices: They form a major ~30-35% of sales; any
volatility in newsprint prices would impact margins.
Foreign Currency Risk: Majority players import newsprint
(vernacular players import ~20% of the requirement) forex
fluctuations would have considerable impact on newsprint cost.
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