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3QFY11 Results
We upgrade DB Corp from Underperform to Outperform after a continued
upturn in the ad environment, positive surprise in 3QFY11 results, both in
revenues and margins and stable newsprint prices. The publisher’s
newspapers registered ad growth of 19% QoQ and 29% YoY ahead of our
estimates and industry growth rates and Ebitda margin at 33% expanded
140bps QoQ despite launch of two new editions in last six months. Post
our upgrade of 18-14% we project 16% earnings Cagr and the stock
trades at 17x forward earnings.
Upturn in ad-environment, stable newsprint prices
DB Corp’s 3QFY11 revenue of Rs3.5bn, up 16%QoQ and 24%YoY, was ahead of
our expectations, led by a positive surprise in ad growth of 19% QoQ and 29%
YoY driven mainly by volume growth and 57% share of local advertising which is
growing faster than national ad-spend. DB Corp remains among the leading print
companies with flagship newspapers Dainik Bhaskar, Divya Bhaskar and
Saurashtra Samachar with combined readership of 17.5m. In mid December 2010
it launched Dainik Bhaskar’s Jamshedpur edition taking the total to 52 editions
(135 sub-editions) across 13 states. However DB Corp’s circulation revenues were
flat QoQ while Ebitda margin expanded 140bps QoQ to 33% mainly due to stable
raw material costs at 31% of revenue. Profit was up 20%QoQ and 30.4%YoY,
which was also ahead of estimates. DB Corp’s radio (brand My FM) revenues for
17 cities presence increased 37%YoY to Rs129m with 25% Ebitda margin.
Impressive track record in new edition launches
DB Corp launched the Jamshedpur edition in mid December 2010 and was shortly
after the successful launch of Ranchi edition in August 2010. Dainik Bhaskar as
per management (based on IMRB readership survey) in Ranchi is at 270,000
average readers versus 303,000 of leader Prabhat Khabar, 168,000 of Hindustan
and 92,000 of Dainik Jagran. DB Corp is now looking to launch a new edition in
Dhanbad shortly. DB Corp continues to maintain an impressive track record of
success in new edition launches even amid intense competition. DB Corp entry
strategy is led by lower cover price and high focus on content and has guided for
FY11 capex at Rs800m.
Earnings upgrade, interim dividend; raise to O-PF.
With a continued upturn in the ad environment and the company consolidating
market positioning, including in new edition launches and leadership position
particularly in Madhya Pradesh, Chattisgarh, Chandigarh and major markets of
Gujarat, we upgrade DB Corp’s consolidated earnings by 18-14% for FY11-13CL.
Although newsprint prices at about Rs28,000/tonne are still high and we remain
negative on company’s radio business where it will bid for more stations in
upcoming phase III of licensing, post our upgrade led by ad revenue surprise, we
now project a 16% earnings Cagr and with the stock trading at 17x forward
earnings, we upgrade from Underperform to Outperform.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
3QFY11 Results
We upgrade DB Corp from Underperform to Outperform after a continued
upturn in the ad environment, positive surprise in 3QFY11 results, both in
revenues and margins and stable newsprint prices. The publisher’s
newspapers registered ad growth of 19% QoQ and 29% YoY ahead of our
estimates and industry growth rates and Ebitda margin at 33% expanded
140bps QoQ despite launch of two new editions in last six months. Post
our upgrade of 18-14% we project 16% earnings Cagr and the stock
trades at 17x forward earnings.
Upturn in ad-environment, stable newsprint prices
DB Corp’s 3QFY11 revenue of Rs3.5bn, up 16%QoQ and 24%YoY, was ahead of
our expectations, led by a positive surprise in ad growth of 19% QoQ and 29%
YoY driven mainly by volume growth and 57% share of local advertising which is
growing faster than national ad-spend. DB Corp remains among the leading print
companies with flagship newspapers Dainik Bhaskar, Divya Bhaskar and
Saurashtra Samachar with combined readership of 17.5m. In mid December 2010
it launched Dainik Bhaskar’s Jamshedpur edition taking the total to 52 editions
(135 sub-editions) across 13 states. However DB Corp’s circulation revenues were
flat QoQ while Ebitda margin expanded 140bps QoQ to 33% mainly due to stable
raw material costs at 31% of revenue. Profit was up 20%QoQ and 30.4%YoY,
which was also ahead of estimates. DB Corp’s radio (brand My FM) revenues for
17 cities presence increased 37%YoY to Rs129m with 25% Ebitda margin.
Impressive track record in new edition launches
DB Corp launched the Jamshedpur edition in mid December 2010 and was shortly
after the successful launch of Ranchi edition in August 2010. Dainik Bhaskar as
per management (based on IMRB readership survey) in Ranchi is at 270,000
average readers versus 303,000 of leader Prabhat Khabar, 168,000 of Hindustan
and 92,000 of Dainik Jagran. DB Corp is now looking to launch a new edition in
Dhanbad shortly. DB Corp continues to maintain an impressive track record of
success in new edition launches even amid intense competition. DB Corp entry
strategy is led by lower cover price and high focus on content and has guided for
FY11 capex at Rs800m.
Earnings upgrade, interim dividend; raise to O-PF.
With a continued upturn in the ad environment and the company consolidating
market positioning, including in new edition launches and leadership position
particularly in Madhya Pradesh, Chattisgarh, Chandigarh and major markets of
Gujarat, we upgrade DB Corp’s consolidated earnings by 18-14% for FY11-13CL.
Although newsprint prices at about Rs28,000/tonne are still high and we remain
negative on company’s radio business where it will bid for more stations in
upcoming phase III of licensing, post our upgrade led by ad revenue surprise, we
now project a 16% earnings Cagr and with the stock trading at 17x forward
earnings, we upgrade from Underperform to Outperform.
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