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DB Corp Ltd.
Initiation -Overweight
DBCL.BO, DBCL IN
Local Print Behemoth. Initiate with Overweight
• Our preferred local language print play, initiate with Overweight,
price target of Rs290: Our price target implies an upside potential of
19% from the current level. DB Corp is a leading local language
newspaper publisher in India with presence across 12 states. Its flagship
Hindi newspaper ‘Dainik Bhaskar’ sells 30 editions across 11 states,
while it publishes ‘Divya Bhaskar’, a Gujarati language newspaper in 2
states.
• Well-positioned in fast growing tier II cities: DBCL is well
entrenched in tier II cities across 12 states across North, West and
Central India. Print media advertising in tier II markets is growing faster
compared to metro locations, driven by strong growth in income and
consumption levels and a wide advertising yield gap between metros and
tier-II cities. In its markets, DBCL has built a strong presence in urban
centers, which account for about 50% of total advertising spend.
• Expansion into new markets backed by strong execution track
record: DBCL has been ahead of its peers in new market entry – it has
recently entered the Jharkhand market and is looking to enter Bihar in
FY12. DBCL’s successful execution track record – from a single state
player in 1995 to 12 state presence currently – holds it in good stead. In
addition, DBCL has an even spread of its readership base and profits
across its markets, which adds resilience to its margins. We forecast EPS
CAGR of 19.9% over FY10-FY13E.
• Price target, valuation, key risks: Our Sep-11 price target of Rs290 is
based on 18x Sep-12E P/E, which is in line with DBCL’s historical
trading band and at a premium to the regional print media peers. Key
risks to our thesis include economic slowdown resulting in lower
advertising growth, sharp increase in newsprint prices, failure to scale up
in new markets, and higher-than-expected competition.
Investment thesis
We initiate coverage on DB Corp with an Overweight rating and set a Sep-11 price
target of Rs290. Our price target is based in 18x Sep-12E P/E, in-line with its historic
trading average and 60% premium to the regional print media peers. DB Corp is a
leading local language newspaper publisher in India with presence in 12 states in
North, Central and West India, popularly termed as the “Hindi Belt” of the country.
It is a dominant newspaper publisher and commands strong leadership position in
most of its markets. Its flagship Hindi newspaper ‘Dainik Bhaskar’ sells 30 editions
across 11 states, while it publishes ‘Divya Bhaskar’, a Gujarati language newspaper
in 2 states.
DBCL’s strong positioning in non metro markets should bode well for its growth
prospects. Growth for print media in non-metro and tier II cities is outpacing growth
in metro cities. Over the period of 2006-09, growth of higher income population
(SEC A and SEC B) in non-metro towns has outpaced the metros. In addition, local
language dailies have a higher reach in upper income population on tier II cities,
compared to English language dailies. As a result, advertising growth for local
language newspapers has been outpacing growth of metro-based English newspapers
over the past few years. This is evidenced by DBCL’s advertising revenue CAGR of
23% over the past 4 years, compared to the overall print advertising CAGR of 8%
over the same period.
Advertising rates for local language newspapers in relation to total readership are still
at a steep discount to metro-based English newspapers. While this gap has narrowed
over the years, the premium for metro-based English newspapers is still significantly
higher. This provides scope for further monetization of the local language readership
base.
DBCL has been ahead of its peers in new market entry – it has recently entered the
Jharkhand market and is looking to enter Bihar in FY12E. DBCL’s successful
execution track record – from a single state player in 1995 to 12 state presence
currently – holds it in good stead. In addition, DBCL has an even spread of its
readership base and profits across its markets, which adds resilience to its margins.
We forecast earnings CAGR of 19.9% over FY10-FY13E. We expect earnings
growth to be driven by revenue CAGR of 11.1% and EBITDA margin expansion of
300bps over FY10-FY13E. We estimate advertisement revenues to grow at 12.8%
CAGR over FY11-FY13E and circulation revenues to grow at 4.1% CAGR over
FY10-FY13E.
Company description
DB Corp (DBCL) is engaged in printing and publication of newspapers in India.
DBCL publishes 7 newspapers in three languages across 13 states with 51 editions
and 130 district editions. It has a strong presence across Tier II and Tier III cities in
the northern Hindi-speaking states of India. DBCL’s flagship newspaper, Dainik
Bhaskar, is one of the leading Hindi newspaper dailies across all the Northern states
as well as in MP. Dainik Bhaskar, along with Gujarati dailies, Divya Bhaskar and
Saurashtra Samachar, have a combined average daily readership of 17.2MM
readers, making it one of the most widely read newspaper groups in India. DBCL’s
other newspapers include Business Bhaskar (published in Northern India and in MP),
DB Gold (compact newspaper for Surat city), DB Star (compact newspaper for
Bhopal, Indore and Jodhpur) and an English newspaper DNA, which is published on
a franchisee basis in Ahmedabad, Surat and Jaipur. DBCL operates 33 printing plants
across 12 states in the country with colour printing capabilities across 80% of plants.
For FY10, advertisement revenues from print media constituted 77% of group
revenues and circulation revenues constituted another 20% of group revenues.
Besides newspapers printing and publication, DBCL is also present in radio business,
with its radio station My FM running 17 stations across 7 states. DBCL also has a
strong presence in Hindi magazines market through 4 magazines targeting different
segments of society. DBCL offers web portals through its subsidiary I Media Corp
Ltd. The web portals offered include Dainikbhaskar.com, divyabhaskar.co.in,
Indiainfo.com and myfmindia.com. DBCL also operates a telecom and mobile
platform, 54567 for SMS-based information sharing. For FY10, other businesses
constituted 3% of group revenues.
Management background
Dainik Bhaskar, DBCL’s flagship Newspaper brand, is established since 1958. DB
Corp, also known as "Bhaskar group", is owned by Agarwal family of Bhopal. Dayto-
day operations are managed by Chairman, Mr. Ramesh Chandra Agarwal and
MD, Mr. Sudhir Agarwal. Currently, DBCL has five independent directors and one
nominee director of Warbug Pincus on its board of 10.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
DB Corp Ltd.
Initiation -Overweight
DBCL.BO, DBCL IN
Local Print Behemoth. Initiate with Overweight
• Our preferred local language print play, initiate with Overweight,
price target of Rs290: Our price target implies an upside potential of
19% from the current level. DB Corp is a leading local language
newspaper publisher in India with presence across 12 states. Its flagship
Hindi newspaper ‘Dainik Bhaskar’ sells 30 editions across 11 states,
while it publishes ‘Divya Bhaskar’, a Gujarati language newspaper in 2
states.
• Well-positioned in fast growing tier II cities: DBCL is well
entrenched in tier II cities across 12 states across North, West and
Central India. Print media advertising in tier II markets is growing faster
compared to metro locations, driven by strong growth in income and
consumption levels and a wide advertising yield gap between metros and
tier-II cities. In its markets, DBCL has built a strong presence in urban
centers, which account for about 50% of total advertising spend.
• Expansion into new markets backed by strong execution track
record: DBCL has been ahead of its peers in new market entry – it has
recently entered the Jharkhand market and is looking to enter Bihar in
FY12. DBCL’s successful execution track record – from a single state
player in 1995 to 12 state presence currently – holds it in good stead. In
addition, DBCL has an even spread of its readership base and profits
across its markets, which adds resilience to its margins. We forecast EPS
CAGR of 19.9% over FY10-FY13E.
• Price target, valuation, key risks: Our Sep-11 price target of Rs290 is
based on 18x Sep-12E P/E, which is in line with DBCL’s historical
trading band and at a premium to the regional print media peers. Key
risks to our thesis include economic slowdown resulting in lower
advertising growth, sharp increase in newsprint prices, failure to scale up
in new markets, and higher-than-expected competition.
Investment thesis
We initiate coverage on DB Corp with an Overweight rating and set a Sep-11 price
target of Rs290. Our price target is based in 18x Sep-12E P/E, in-line with its historic
trading average and 60% premium to the regional print media peers. DB Corp is a
leading local language newspaper publisher in India with presence in 12 states in
North, Central and West India, popularly termed as the “Hindi Belt” of the country.
It is a dominant newspaper publisher and commands strong leadership position in
most of its markets. Its flagship Hindi newspaper ‘Dainik Bhaskar’ sells 30 editions
across 11 states, while it publishes ‘Divya Bhaskar’, a Gujarati language newspaper
in 2 states.
DBCL’s strong positioning in non metro markets should bode well for its growth
prospects. Growth for print media in non-metro and tier II cities is outpacing growth
in metro cities. Over the period of 2006-09, growth of higher income population
(SEC A and SEC B) in non-metro towns has outpaced the metros. In addition, local
language dailies have a higher reach in upper income population on tier II cities,
compared to English language dailies. As a result, advertising growth for local
language newspapers has been outpacing growth of metro-based English newspapers
over the past few years. This is evidenced by DBCL’s advertising revenue CAGR of
23% over the past 4 years, compared to the overall print advertising CAGR of 8%
over the same period.
Advertising rates for local language newspapers in relation to total readership are still
at a steep discount to metro-based English newspapers. While this gap has narrowed
over the years, the premium for metro-based English newspapers is still significantly
higher. This provides scope for further monetization of the local language readership
base.
DBCL has been ahead of its peers in new market entry – it has recently entered the
Jharkhand market and is looking to enter Bihar in FY12E. DBCL’s successful
execution track record – from a single state player in 1995 to 12 state presence
currently – holds it in good stead. In addition, DBCL has an even spread of its
readership base and profits across its markets, which adds resilience to its margins.
We forecast earnings CAGR of 19.9% over FY10-FY13E. We expect earnings
growth to be driven by revenue CAGR of 11.1% and EBITDA margin expansion of
300bps over FY10-FY13E. We estimate advertisement revenues to grow at 12.8%
CAGR over FY11-FY13E and circulation revenues to grow at 4.1% CAGR over
FY10-FY13E.
Company description
DB Corp (DBCL) is engaged in printing and publication of newspapers in India.
DBCL publishes 7 newspapers in three languages across 13 states with 51 editions
and 130 district editions. It has a strong presence across Tier II and Tier III cities in
the northern Hindi-speaking states of India. DBCL’s flagship newspaper, Dainik
Bhaskar, is one of the leading Hindi newspaper dailies across all the Northern states
as well as in MP. Dainik Bhaskar, along with Gujarati dailies, Divya Bhaskar and
Saurashtra Samachar, have a combined average daily readership of 17.2MM
readers, making it one of the most widely read newspaper groups in India. DBCL’s
other newspapers include Business Bhaskar (published in Northern India and in MP),
DB Gold (compact newspaper for Surat city), DB Star (compact newspaper for
Bhopal, Indore and Jodhpur) and an English newspaper DNA, which is published on
a franchisee basis in Ahmedabad, Surat and Jaipur. DBCL operates 33 printing plants
across 12 states in the country with colour printing capabilities across 80% of plants.
For FY10, advertisement revenues from print media constituted 77% of group
revenues and circulation revenues constituted another 20% of group revenues.
Besides newspapers printing and publication, DBCL is also present in radio business,
with its radio station My FM running 17 stations across 7 states. DBCL also has a
strong presence in Hindi magazines market through 4 magazines targeting different
segments of society. DBCL offers web portals through its subsidiary I Media Corp
Ltd. The web portals offered include Dainikbhaskar.com, divyabhaskar.co.in,
Indiainfo.com and myfmindia.com. DBCL also operates a telecom and mobile
platform, 54567 for SMS-based information sharing. For FY10, other businesses
constituted 3% of group revenues.
Management background
Dainik Bhaskar, DBCL’s flagship Newspaper brand, is established since 1958. DB
Corp, also known as "Bhaskar group", is owned by Agarwal family of Bhopal. Dayto-
day operations are managed by Chairman, Mr. Ramesh Chandra Agarwal and
MD, Mr. Sudhir Agarwal. Currently, DBCL has five independent directors and one
nominee director of Warbug Pincus on its board of 10.
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