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Advertising growth moderating: According to management, advertising
growth rates are moderating – key areas of stress are autos, lifestyle and real
estate segments, while education, govt., health care are holding on. Management
noted that the bright spot where print advertising in tier II cities is picking up is
premium FMCG products. Management expects print advertising to grow by
12%-14% and DBCL to register 14%-15% ad growth.
Recent correction in newsprint prices bodes well: Domestic newsprint prices
have corrected by 2%-3% recently, while management was expecting another
5% correction, the chances of that look slim now, given recent Rupee
depreciation vs the US$ (newsprint prices are on US$ parity).
Maharashtra roll-out on track: DBCL is launching 4th edition in Maharashtra
in October and expects full roll out by next year, with 8-9 editions. According to
management, Maharashtra operations will break even in three years, while
Jharkhand will take four years to break even. Management expects Rs300-
350MM loss in Maharashtra in FY12E, which should fall to Rs200MM next
year, while loss in Jharkhand should fall from Rs200-250MM to Rs100MM next
year.
Looking to bid for Phase III radio licenses: Management expect the bidding
process to start in March-12, and will bid for licenses in 25-30 tier II and III
locations, where they have newspaper operations. Management expects radio to
compliment their print operations and see significant synergies between the two,
largely from advertising sales. Management expects capex on radio to be low, as
all most of their studios will be based on the existing printing locations.
Valuation, price target and risks: DBCL stock has corrected by ~30% YTD on
concerns of ad slowdown. The stock is now trading at 12.4x FY13E P/E on our
estimates that assume ad growth slowing to 9% in FY13E, and is pricing in the
potential slowdown in ad growth. Given DBCL’s successful track record of
expansion into new markets, we are confident of it delivering on its plans in
Maharashtra, which we believe will drive stock performance from here. Our
Mar-12 PT of Rs290 is based on 18xFY13E P/E. Key risks include rising
competitive intensity, failure to scale up in new markets, increase in newsprint
costs and further slowdown in economic growth.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Advertising growth moderating: According to management, advertising
growth rates are moderating – key areas of stress are autos, lifestyle and real
estate segments, while education, govt., health care are holding on. Management
noted that the bright spot where print advertising in tier II cities is picking up is
premium FMCG products. Management expects print advertising to grow by
12%-14% and DBCL to register 14%-15% ad growth.
Recent correction in newsprint prices bodes well: Domestic newsprint prices
have corrected by 2%-3% recently, while management was expecting another
5% correction, the chances of that look slim now, given recent Rupee
depreciation vs the US$ (newsprint prices are on US$ parity).
Maharashtra roll-out on track: DBCL is launching 4th edition in Maharashtra
in October and expects full roll out by next year, with 8-9 editions. According to
management, Maharashtra operations will break even in three years, while
Jharkhand will take four years to break even. Management expects Rs300-
350MM loss in Maharashtra in FY12E, which should fall to Rs200MM next
year, while loss in Jharkhand should fall from Rs200-250MM to Rs100MM next
year.
Looking to bid for Phase III radio licenses: Management expect the bidding
process to start in March-12, and will bid for licenses in 25-30 tier II and III
locations, where they have newspaper operations. Management expects radio to
compliment their print operations and see significant synergies between the two,
largely from advertising sales. Management expects capex on radio to be low, as
all most of their studios will be based on the existing printing locations.
Valuation, price target and risks: DBCL stock has corrected by ~30% YTD on
concerns of ad slowdown. The stock is now trading at 12.4x FY13E P/E on our
estimates that assume ad growth slowing to 9% in FY13E, and is pricing in the
potential slowdown in ad growth. Given DBCL’s successful track record of
expansion into new markets, we are confident of it delivering on its plans in
Maharashtra, which we believe will drive stock performance from here. Our
Mar-12 PT of Rs290 is based on 18xFY13E P/E. Key risks include rising
competitive intensity, failure to scale up in new markets, increase in newsprint
costs and further slowdown in economic growth.
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