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India Equity Research Reports, IPO and Stock News
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Strong ad-revenue growth on account of higher colour inventory,
peg 16% CAGR: We expect JPL to record a strong ad-revenue
growth of ~20% yoy in FY2011 on account of increase in colour
space inventory to ~50% (in line with management's guidance)
and higher volumes (absorption of ad-rate hike of 8-9%). For
FY2010-13, we expect JPL's ad-revenue to post a CAGR of 16%
(on higher proportion of colour ads, rate hikes and pickup in ad
spend) aiding top-line CAGR of ~14% over the period.
Margins to remain stable owing to significant cost efficiencies:
For FY2011, we expect OPM to sustain at ~30% despite the
~10-11% rise in newsprint costs (JPL has substantial inventory
booked for imported newsprint) aided by higher top-line growth
on the back of increase in advertising spend across sectors,
various cost curtailment measures and improving profitability in
the nascent businesses of i-Next/City Plus and OOH/event
management.
Underperformance a good entry point, JPL attractive at 13.2x
FY2013E EPS: JPL acquired the print business from Mid-Day
Multimedia whose presence in markets like Mumbai, Delhi,
Bangalore and Pune (recently launched) is likely to fill the gap in
JPL's portfolio v/s its peers HT Media (HT and Hindustan) and
DB Corp (Dainik Bhaskar and DNA), which offer both English
and Hindi publications to its advertisers. Hence, we believe that
JPL's combined offerings are likely to boost its advertising revenues
due to the bundling effect. While we have not factored the deal
in JPL's numbers, we believe the deal is likely to be earnings
accretive by ~2-3% in FY2011 (Mid-Day numbers for the full
year will be consolidated in JPL's numbers in 4QFY2011).
Moreover, with Blackstone's recent investment of `225cr and a
wider portfolio (including Mid-Day publications), we believe that
JPL is well poised to benefit from steady growth in print media.
Underperformance of the stock and attractive valuations (at the
CMP, the stock trades at 13.2x FY2013E EPS) provides a good
entry point for investors.
Outlook and Valuation: We have factored in our top-line
estimate, the increase in circulation volume (~10-11% yoy
growth, reported in 3QFY2011 results) which is heartening
indicating renewed focus in the company's core markets (UP and
Bihar-Jharkhand; volume growth was equally split between these
two markets) and curtails fears of Jagran losing its numero uno
position on account of increase in competitive intensity (HMVL
penetrating in UP and DB Corp. penetration in Jharkhand
market). The other businesses (OOH, event management and
SMS services) are estimated to record CAGR of 17% during the
mentioned period on better traction. In terms of earnings, we
expect JPL to report modest CAGR of 17% over FY2010-13E
driven largely by top-line growth and sustained margins.
However, adjusting for the `8cr foreign exchange gains in
FY2010, we expect JPL to report a CAGR of 19% in earnings
over FY2010-13. We believe underperformance of the stock
provides a good entry point and maintain a Buy, with a Target
Price of `185, based on 20x FY2013E (in line with its historical
valuations).
Integration of the Mid-Day numbers pose an upside risk to our
estimates. The downside risks to our estimates include-1) higher
than anticipated increase in newsprint prices and 2) increased
competitive intensity.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Strong ad-revenue growth on account of higher colour inventory,
peg 16% CAGR: We expect JPL to record a strong ad-revenue
growth of ~20% yoy in FY2011 on account of increase in colour
space inventory to ~50% (in line with management's guidance)
and higher volumes (absorption of ad-rate hike of 8-9%). For
FY2010-13, we expect JPL's ad-revenue to post a CAGR of 16%
(on higher proportion of colour ads, rate hikes and pickup in ad
spend) aiding top-line CAGR of ~14% over the period.
Margins to remain stable owing to significant cost efficiencies:
For FY2011, we expect OPM to sustain at ~30% despite the
~10-11% rise in newsprint costs (JPL has substantial inventory
booked for imported newsprint) aided by higher top-line growth
on the back of increase in advertising spend across sectors,
various cost curtailment measures and improving profitability in
the nascent businesses of i-Next/City Plus and OOH/event
management.
Underperformance a good entry point, JPL attractive at 13.2x
FY2013E EPS: JPL acquired the print business from Mid-Day
Multimedia whose presence in markets like Mumbai, Delhi,
Bangalore and Pune (recently launched) is likely to fill the gap in
JPL's portfolio v/s its peers HT Media (HT and Hindustan) and
DB Corp (Dainik Bhaskar and DNA), which offer both English
and Hindi publications to its advertisers. Hence, we believe that
JPL's combined offerings are likely to boost its advertising revenues
due to the bundling effect. While we have not factored the deal
in JPL's numbers, we believe the deal is likely to be earnings
accretive by ~2-3% in FY2011 (Mid-Day numbers for the full
year will be consolidated in JPL's numbers in 4QFY2011).
Moreover, with Blackstone's recent investment of `225cr and a
wider portfolio (including Mid-Day publications), we believe that
JPL is well poised to benefit from steady growth in print media.
Underperformance of the stock and attractive valuations (at the
CMP, the stock trades at 13.2x FY2013E EPS) provides a good
entry point for investors.
Outlook and Valuation: We have factored in our top-line
estimate, the increase in circulation volume (~10-11% yoy
growth, reported in 3QFY2011 results) which is heartening
indicating renewed focus in the company's core markets (UP and
Bihar-Jharkhand; volume growth was equally split between these
two markets) and curtails fears of Jagran losing its numero uno
position on account of increase in competitive intensity (HMVL
penetrating in UP and DB Corp. penetration in Jharkhand
market). The other businesses (OOH, event management and
SMS services) are estimated to record CAGR of 17% during the
mentioned period on better traction. In terms of earnings, we
expect JPL to report modest CAGR of 17% over FY2010-13E
driven largely by top-line growth and sustained margins.
However, adjusting for the `8cr foreign exchange gains in
FY2010, we expect JPL to report a CAGR of 19% in earnings
over FY2010-13. We believe underperformance of the stock
provides a good entry point and maintain a Buy, with a Target
Price of `185, based on 20x FY2013E (in line with its historical
valuations).
Integration of the Mid-Day numbers pose an upside risk to our
estimates. The downside risks to our estimates include-1) higher
than anticipated increase in newsprint prices and 2) increased
competitive intensity.
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