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Management announces foray into Maharashtra with a Marathi daily: DB Corp
has announced its entry into Maharashtra with a Marathi daily while postponing
its entry into Bihar till the end of FY2012. This has come as a surprise, though it is
a positive development due to the following reasons: 1) Maharashtra is the third
largest state with an average GDP growth rate of 14.5%, 2) per capita income of
the state stands at a healthy `79,515, 3) the state has a high literacy rate of 77%
and a penetration gap of 71%, and 4) the state ad-market is estimated at
~`700cr (excl. Mumbai) and growing at 15% per annum.
About the launch: Maharashtra is a lucrative market in terms of advertisement
with an ad-market of ~`700cr compared to Bihar, which has an ad market of
~`200cr and is under penetrated as well. Maharashtra’s top-three Marathi
dailies viz., Lokmat, Sakal and Pudhari have an average issue readership (AIR) of
~0.8cr, 0.5cr and 0.3cr, respectively (Source: IRS Survey Q3 2010). While
management refrained from giving details about the launch strategy and
numbers, we expect DB Corp to command ad market share of ~2% and garner
net revenues of ~`22cr in FY2012 in Maharashtra. However, the edition(s) are
likely to drag down the company’s operating profit. We estimate combined
operating loss for the Jharkhand and Maharashtra editions at ~`37cr in FY2012.
Outlook and Valuation: We are enthused with the news that DB Corp’s
ad-focused business model would benefit from the larger ad-market in
Maharashtra vis-a-vis Bihar. We have however, not factored the launch into our
numbers as we await more details. Nonetheless, we re-iterate our confidence on
management’s track record of successful new launches (launched the Gujarati
paper, Divya Bhaskar in 2003, which became number one on the first day of its
launch). However, we remain cautious on the company’s pace of the launch. At
the CMP of `251, DBCL is trading at 17.1x FY2013E consolidated EPS of `17.
We maintain a Buy on the stock with a Target Price of `358 based on 21x
FY2013E earnings. Downside risks to our estimates include – 1) sharp rise in
newsprint prices, 2) intensifying competition, and 3) higher-than-expected losses/
increase in breakeven period of its new launches.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
DB Corp. – Event Update -Announces foray into Maharashtra
Angel Broking maintains a Buy on DB Corp. with a Target Price of Rs. 358.
Management announces foray into Maharashtra with a Marathi daily: DB Corp
has announced its entry into Maharashtra with a Marathi daily while postponing
its entry into Bihar till the end of FY2012. This has come as a surprise, though it is
a positive development due to the following reasons: 1) Maharashtra is the third
largest state with an average GDP growth rate of 14.5%, 2) per capita income of
the state stands at a healthy `79,515, 3) the state has a high literacy rate of 77%
and a penetration gap of 71%, and 4) the state ad-market is estimated at
~`700cr (excl. Mumbai) and growing at 15% per annum.
About the launch: Maharashtra is a lucrative market in terms of advertisement
with an ad-market of ~`700cr compared to Bihar, which has an ad market of
~`200cr and is under penetrated as well. Maharashtra’s top-three Marathi
dailies viz., Lokmat, Sakal and Pudhari have an average issue readership (AIR) of
~0.8cr, 0.5cr and 0.3cr, respectively (Source: IRS Survey Q3 2010). While
management refrained from giving details about the launch strategy and
numbers, we expect DB Corp to command ad market share of ~2% and garner
net revenues of ~`22cr in FY2012 in Maharashtra. However, the edition(s) are
likely to drag down the company’s operating profit. We estimate combined
operating loss for the Jharkhand and Maharashtra editions at ~`37cr in FY2012.
Outlook and Valuation: We are enthused with the news that DB Corp’s
ad-focused business model would benefit from the larger ad-market in
Maharashtra vis-a-vis Bihar. We have however, not factored the launch into our
numbers as we await more details. Nonetheless, we re-iterate our confidence on
management’s track record of successful new launches (launched the Gujarati
paper, Divya Bhaskar in 2003, which became number one on the first day of its
launch). However, we remain cautious on the company’s pace of the launch. At
the CMP of `251, DBCL is trading at 17.1x FY2013E consolidated EPS of `17.
We maintain a Buy on the stock with a Target Price of `358 based on 21x
FY2013E earnings. Downside risks to our estimates include – 1) sharp rise in
newsprint prices, 2) intensifying competition, and 3) higher-than-expected losses/
increase in breakeven period of its new launches.
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