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Deccan Chronicle Holdings- Unrest over Telangana impacts ad volume…
Deccan Chronicle (DCHL) reported a disappointing set of numbers with
the topline declining 14.5% YoY to | 199.6 crore (I-direct estimate: |
257.2 crore) in an otherwise robust quarter for media companies backed
by the festive season (HT Media, DB Corp and Jagran Prakashan
reported over 20% YoY growth in Q3FY11). The management attributed
this to a sharp fall in advertisement volume due to the unrest in Andhra
Pradesh where the company has over 60% readership share. With
falling advertisement volumes, margins also declined by 1648 bps YoY
to 37.8%. DCHL reported an EBITDA of | 75.4 crore. Higher tax outgo of
| 25.0 crore further dented the profitability with PAT margins at 17.6%.
PAT for the quarter stood at | 35.2 crore, down 54.7% YoY.
�� Highlights for the quarter
Marred by unrest in Andhra Pradesh over the Telangana row the
company witnessed a steep fall in advertisement volume resulting in
~15% YoY decline in advertisement revenues. The circulation
revenue remained stable at ~| 14 crore. The company has been
unable to grow its ad volumes for the past three quarters. The
management expects the pain to continue for a couple more
quarters. DCHL launched the Coimbatore edition in this quarter with
an initial circulation of ~ 35,000 copies.
Valuation
The management has attributed the dismal performance to the unrest in
Andhra Pradesh. Our interaction indicates that it may take five or six
months before ad volumes jumps back to earlier levels. We have revised
our estimates downwards. At the CMP of | 79, the stock is trading at 8.2x
FY12E ex-IPL EPS of | 9.6. We have valued the stock (ex-IPL) at 9x (~50%
discount to Jagran Prakashan given the dismal performance and unrest in
key geographies of operation) FY12E ex-IPL EPS to arrive at a value of |
86 per share. Our target price implies an upside of 10%. We are
downgrading the stock from STRONG BUY to BUY.
Result analysis
�� Slight increase in raw material cost
Raw material costs increased by | 3.9 crore QoQ primarily on the
back of increased circulation due to the launch of the Coimbatore
edition. With declining ad revenues, raw material cost, as a
percentage of revenue, increased sharply to 41% from 33% in the last
quarter. We expect newsprint prices to remain stable at current levels.
�� EBITDA and PAT margin
EBITDA margins for the quarter stood at 37.8% as compared to
54.3% in Q3FY10 and 49.8% in Q2FY11. The margin decline was led
by lower revenue realisation as compared to last year.
PAT for the quarter stood at | 35.2 crore, significantly lower than our
estimate of | 85.8 crore. PAT margins stood at 17.6% as compared to
33.3% in Q3FY10 and 34.9% in Q2FY11.
Outlook and Valuations
Outlook
The company reported a disappointing set of numbers for the quarter.
The management attributed this to the unrest in Andhra Pradesh over
the Telangana issue. Our interaction with the management has indicated
that it may take five or six months before advertisement volumes jump
back to earlier levels. Given the impact of the disturbance and reduced
advertisement expense by corporates, we have revised our estimates
downwards. Our consolidated sales and EPS estimates are down by
6.8% and 19.6%, respectively, for FY11E and 11.7% and 31.3%,
respectively, for FY12E.
The board has approved the proposal for buyback of equity shares at a
price not exceeding | 180 per equity share for an aggregate amount not
exceeding | 270 crore. The maximum number of shares shall not
exceed 3.45 crore equity shares, which represents 14.17% of the
present paid-up capital of the company. However, the promoter holding
in DCHL shall not exceed 75% of the paid-up capital of the company
post buyback. The minimum number of equity shares (minimum
buyback shares) to be bought back is 1.0 crore equity shares.
The company has also decided to merge the IPL team subsidiary
Deccan Chargers Sporting Ventures and retail store chain subsidiary
Odyssey India with itself.
Valuation
At the CMP of | 79, the stock is trading at 8.5x FY11E ex-IPL EPS of | 9.2
and 8.2x FY12E ex-IPL EPS of | 9.6. We have valued the stock (ex-IPL) at
9x (~50% discount to Jagran Prakashan given the dismal performance
and unrest in key geographies of operation) FY12E ex-IPL EPS to arrive at
a value of | 86 per share. The IPL team has an additional value of |
18/share. We are not including the IPL value in our target price till further
clarity emerges. Our target price implies an upside of 10%. We have
downgraded the stock from STRONG BUY to BUY.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Deccan Chronicle Holdings- Unrest over Telangana impacts ad volume…
Deccan Chronicle (DCHL) reported a disappointing set of numbers with
the topline declining 14.5% YoY to | 199.6 crore (I-direct estimate: |
257.2 crore) in an otherwise robust quarter for media companies backed
by the festive season (HT Media, DB Corp and Jagran Prakashan
reported over 20% YoY growth in Q3FY11). The management attributed
this to a sharp fall in advertisement volume due to the unrest in Andhra
Pradesh where the company has over 60% readership share. With
falling advertisement volumes, margins also declined by 1648 bps YoY
to 37.8%. DCHL reported an EBITDA of | 75.4 crore. Higher tax outgo of
| 25.0 crore further dented the profitability with PAT margins at 17.6%.
PAT for the quarter stood at | 35.2 crore, down 54.7% YoY.
�� Highlights for the quarter
Marred by unrest in Andhra Pradesh over the Telangana row the
company witnessed a steep fall in advertisement volume resulting in
~15% YoY decline in advertisement revenues. The circulation
revenue remained stable at ~| 14 crore. The company has been
unable to grow its ad volumes for the past three quarters. The
management expects the pain to continue for a couple more
quarters. DCHL launched the Coimbatore edition in this quarter with
an initial circulation of ~ 35,000 copies.
Valuation
The management has attributed the dismal performance to the unrest in
Andhra Pradesh. Our interaction indicates that it may take five or six
months before ad volumes jumps back to earlier levels. We have revised
our estimates downwards. At the CMP of | 79, the stock is trading at 8.2x
FY12E ex-IPL EPS of | 9.6. We have valued the stock (ex-IPL) at 9x (~50%
discount to Jagran Prakashan given the dismal performance and unrest in
key geographies of operation) FY12E ex-IPL EPS to arrive at a value of |
86 per share. Our target price implies an upside of 10%. We are
downgrading the stock from STRONG BUY to BUY.
Result analysis
�� Slight increase in raw material cost
Raw material costs increased by | 3.9 crore QoQ primarily on the
back of increased circulation due to the launch of the Coimbatore
edition. With declining ad revenues, raw material cost, as a
percentage of revenue, increased sharply to 41% from 33% in the last
quarter. We expect newsprint prices to remain stable at current levels.
�� EBITDA and PAT margin
EBITDA margins for the quarter stood at 37.8% as compared to
54.3% in Q3FY10 and 49.8% in Q2FY11. The margin decline was led
by lower revenue realisation as compared to last year.
PAT for the quarter stood at | 35.2 crore, significantly lower than our
estimate of | 85.8 crore. PAT margins stood at 17.6% as compared to
33.3% in Q3FY10 and 34.9% in Q2FY11.
Outlook and Valuations
Outlook
The company reported a disappointing set of numbers for the quarter.
The management attributed this to the unrest in Andhra Pradesh over
the Telangana issue. Our interaction with the management has indicated
that it may take five or six months before advertisement volumes jump
back to earlier levels. Given the impact of the disturbance and reduced
advertisement expense by corporates, we have revised our estimates
downwards. Our consolidated sales and EPS estimates are down by
6.8% and 19.6%, respectively, for FY11E and 11.7% and 31.3%,
respectively, for FY12E.
The board has approved the proposal for buyback of equity shares at a
price not exceeding | 180 per equity share for an aggregate amount not
exceeding | 270 crore. The maximum number of shares shall not
exceed 3.45 crore equity shares, which represents 14.17% of the
present paid-up capital of the company. However, the promoter holding
in DCHL shall not exceed 75% of the paid-up capital of the company
post buyback. The minimum number of equity shares (minimum
buyback shares) to be bought back is 1.0 crore equity shares.
The company has also decided to merge the IPL team subsidiary
Deccan Chargers Sporting Ventures and retail store chain subsidiary
Odyssey India with itself.
Valuation
At the CMP of | 79, the stock is trading at 8.5x FY11E ex-IPL EPS of | 9.2
and 8.2x FY12E ex-IPL EPS of | 9.6. We have valued the stock (ex-IPL) at
9x (~50% discount to Jagran Prakashan given the dismal performance
and unrest in key geographies of operation) FY12E ex-IPL EPS to arrive at
a value of | 86 per share. The IPL team has an additional value of |
18/share. We are not including the IPL value in our target price till further
clarity emerges. Our target price implies an upside of 10%. We have
downgraded the stock from STRONG BUY to BUY.
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