D B CORP: ‘The Dhoni Effect’ continues: Pinc

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We visited DB Corp’s Ranchi printing plant so as to get ground
level idea of DB Corp’s performance in the new market –
Ranchi and the print market in entirety.
‘The Dhoni Effect’ continues
As per the meetings with various local advertisers, major key
takeaway is that their business is growing at +20% and is expecting
similar kind of robust growth going forward (both from same store
growth and through expansion). Proportionately the ad spend
allocation has also increased, they expect ad spend to further rise
for the business. The most preferred mode of advertising is Print
(more than 50% of the ad budget goes to print) followed by Radio
and Outdoor advertising.
Intense competition
Jharkhand (JHK) market has experienced severe competition after
the launch of Dainik Bhaskar. JHK is a Rs1.5bn ad market with four
main print players - Prabhat Khabar, the leader with ~40% ad market
share followed by Hindustan, Dainik Jagran and Dainik Bhaskar.
DB Corp, an eight month old entrant, is gaining its ground on the
back of lucrative ad rates to advertisers and compelling content to
readers.
Ranchi’s largest circulated daily
DB Corp’s aggressive pricing play has consistently rewarded the
group. Dainik Bhaskar, within eight months of its launch, is already
the largest circulated newspaper in Ranchi (main city and in land
area) with 146,000 copies against Prabhat Khabar with125,000
copies and Hindustan with 130,000 copies. Renewal of annual
subscription of Ranchi edition would be a key factor to gauge for.
VALUATIONS AND RECOMMENDATION
DBCL’s strategic penetration into high-growth markets, optimum
exploitation of readership base and a uniformly distributed business
model make us positive about the company’s growth prospects.
Attractive growth opportunities in Hindi/regional print dailies make
a strong case for DBCL, as the business model is skewed towards
ad revenue (76% of total revenue). At CMP, the stock is trading at
16x FY12E earnings. We reiterate our ‘BUY’ recommendation with
12 month target price of Rs315 (21x FY12E EPS).


􀀹 Empaneled for Government ads
Government ads accounts for ~20% of total ad pie. Any usual paper takes 12-15 months
to get empanelment with government for ads; however DB Corp on account of its largest
circulation gained government empanelment within four months of its launch.
􀀹 Jharkhand foray to complete with Dhanbad launch
DB Corp is planning to launch its Dhanbad edition by mid April’11. With Jameshdpur,
Ranchi and Dhanbad editions JHK market will be fully captured.
􀀹 Presence in Maharashtra to be felt soon
Company has plans to enter into Rs7bn Marathi ad market (excluding Mumbai and Pune
market) with its Aurangabad edition by June’11 (experienced veterans to handle the daily –
“Dainik Divya”).
􀀹 Launch in Bihar on schedule
As per management expectation Dainik Bhaskar will enter into the Bihar market by Oct’11
(Diwali 2011). Funding of total capex for new launches is estimated to be Rs1.2bn, we
expect this funding to be smooth with strong operating cash flows.