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4QFY11 Results
In midst of robust advertising environment DB registered 31%YoYgrowth
in ad-revenues, although the 4QFY11 results had a negative surprise in
margins. Even as raw material prices have remained stable, new edition
expenses cause our 4% earnings downgrade in FY12-13. DB is set to
launch the first Maharashtra edition, end of month, taking the total to 60
across newspapers. Meanwhile, led by projected 18%YoY ad growth,
earnings growth will average 15% over FY12-13CL and with the stock
trading at 14x forward earnings, we maintain Outperform.
Robust ad environment but margin pressures
Aided by advertising growth of 31%YoY to Rs2.5bn, DB reported 4QFY11
revenue increase of 23%YoY to Rs3.2bn, 2% ahead of our estimates.
Circulation/subscriptions account for 17% of total revenues and grew 1%YoY.
Even as raw material cost for the company was down 2%QoQ Ebitda margins
declined 8ppt to 25% following 8%QoQ higher selling general and
administration expenses on new edition launches in Jharkhand and
Maharashtra including Rs43m towards one-off expenses for pre-launch
activities. DB FY11 Ebitda growth has been 18%YoY with margins of 32% and
pre exceptional PAT at Rs2.4bn was up 29%YoY, 3% lower than estimates
following margin pressures. In FY11 DB completed merger of radio business
(from 57% subsidiary to 100% ownership) resulting in lower tax rate of 28%.
The radio business revenues in turn for 17 cities presence increased 34%YoY
to Rs469m with 18% Ebitda margin.
Multiple new edition launches
After the successful launch of its Ranchi edition in August 2010, DB launched
the Jamshedpur edition in December 2010 and Dhanbad has been recently
launched in April 2011. Now DB is looking to expand its presence in
Maharashtra state with the launch of the first edition of Divya Marathi on May
29th 2011 in Aurangabad to be followed by Nashik. DB is looking at an entry
strategy led by lower cover price and will compete in Maharashtra with Lokmat
and Sakal which have an average readership of 7.6m and 4.6m respectively. DB
continues to maintain an impressive track record of success in new edition
launches even amid intense competition. Management has guided for
breakeven for the new editions in three to four years of launch.
Earnings downgrade, maintain O-PF
With a robust ad environment and DB consolidating market positioning, including
in new edition launches and leadership position particularly in Madhya Pradesh,
Chattisgarh, Chandigarh and major markets of Gujarat, we maintain our revenue
estimates. However we downgrade our FY12-13CL earnings estimates for DB
primarily due to new editions launch and increase in raw material costs even as
newsprint prices have remain stable at Rs28,000 in 4QFY11. Yet led by
18%YoY ad growth and amid margin pressures earnings growth will still
average 15% over FY12-13CL. With the stock trading at 14x forward
earnings, we maintain Outperform.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
4QFY11 Results
In midst of robust advertising environment DB registered 31%YoYgrowth
in ad-revenues, although the 4QFY11 results had a negative surprise in
margins. Even as raw material prices have remained stable, new edition
expenses cause our 4% earnings downgrade in FY12-13. DB is set to
launch the first Maharashtra edition, end of month, taking the total to 60
across newspapers. Meanwhile, led by projected 18%YoY ad growth,
earnings growth will average 15% over FY12-13CL and with the stock
trading at 14x forward earnings, we maintain Outperform.
Robust ad environment but margin pressures
Aided by advertising growth of 31%YoY to Rs2.5bn, DB reported 4QFY11
revenue increase of 23%YoY to Rs3.2bn, 2% ahead of our estimates.
Circulation/subscriptions account for 17% of total revenues and grew 1%YoY.
Even as raw material cost for the company was down 2%QoQ Ebitda margins
declined 8ppt to 25% following 8%QoQ higher selling general and
administration expenses on new edition launches in Jharkhand and
Maharashtra including Rs43m towards one-off expenses for pre-launch
activities. DB FY11 Ebitda growth has been 18%YoY with margins of 32% and
pre exceptional PAT at Rs2.4bn was up 29%YoY, 3% lower than estimates
following margin pressures. In FY11 DB completed merger of radio business
(from 57% subsidiary to 100% ownership) resulting in lower tax rate of 28%.
The radio business revenues in turn for 17 cities presence increased 34%YoY
to Rs469m with 18% Ebitda margin.
Multiple new edition launches
After the successful launch of its Ranchi edition in August 2010, DB launched
the Jamshedpur edition in December 2010 and Dhanbad has been recently
launched in April 2011. Now DB is looking to expand its presence in
Maharashtra state with the launch of the first edition of Divya Marathi on May
29th 2011 in Aurangabad to be followed by Nashik. DB is looking at an entry
strategy led by lower cover price and will compete in Maharashtra with Lokmat
and Sakal which have an average readership of 7.6m and 4.6m respectively. DB
continues to maintain an impressive track record of success in new edition
launches even amid intense competition. Management has guided for
breakeven for the new editions in three to four years of launch.
Earnings downgrade, maintain O-PF
With a robust ad environment and DB consolidating market positioning, including
in new edition launches and leadership position particularly in Madhya Pradesh,
Chattisgarh, Chandigarh and major markets of Gujarat, we maintain our revenue
estimates. However we downgrade our FY12-13CL earnings estimates for DB
primarily due to new editions launch and increase in raw material costs even as
newsprint prices have remain stable at Rs28,000 in 4QFY11. Yet led by
18%YoY ad growth and amid margin pressures earnings growth will still
average 15% over FY12-13CL. With the stock trading at 14x forward
earnings, we maintain Outperform.
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