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DB Corp (DBCL)
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Peak investment quarter. DBCL reported apparently weak 2QFY12 EBITDA of Rs771
mn (-19% yoy). However, adjusted for Rs58 mn of forex losses (un-hedged ECB
exposure), EBITDA of Rs829 mn (-13% yoy) was in line with expectations. Mature
business EBITDA came in at Rs1.07 bn (+2% yoy) in a challenging environment;
emerging business losses increased to Rs231 mn (+189% yoy). Retain BUY with
FY2013E TP of Rs320 (Rs330 previously); inexpensive valuations at 13.5X FY2013E
mature business EPS estimates, given new expansions, are likely to be value-accretive in
time.
2QFY12 results appear weak given Rs58 mn forex losses
DBCL reported optically weak 2QFY12 EBITDA of Rs771 mn (-19% yoy) led by forex losses of
Rs58 mn (un-hedged ECB exposure) despite reasonably robust 16% yoy advertising revenue
growth. Adjusted EBITDA of Rs829 mn (-13% yoy) was in line with expectations, impacted by
Rs150 mn increased losses in emerging markets (Jharkhand/Maharashtra).
DBCL reported 2QFY12 EBITDA of Rs1.07 bn (+2% yoy) in mature markets led by robust
leading position across MPCG (MP-Chhattisgarh), Rajasthan, CPH (Chandigarh-Punjab-Haryana)
and Gujarat, in a challenging advertising environment.
2QFY12 may be the peak investment quarter with Rs231 mn of emerging market losses at
~22% of mature market earnings of Rs1.07 bn.
Retain BUY led by mature market franchise; FY2013E TP of Rs320
Retain BUY with FY2013E TP of Rs320 (Rs330 previously); our FY2012E-13E earnings estimates are
revised to Rs11.6 (Rs13.0 previously) and Rs14.1 (Rs14.2) led by (1) one-off forex losses (overhead
costs) in FY2012E, (2) reduced advertising revenues and (3) revised Rs/US$ assumptions impacting
newsprint prices; however, the latter may be negated by a reported modest decline in domestic
newsprint prices (80% consumption share in DBCL). Additionally, we highlight that the apparent
decline in EPS to Rs11.6 in FY2012E from Rs14.1 in FY2011 has to be viewed against (1) forex
losses in FY2012E and (2) tax savings from accrued losses of FM radio business in FY2011.
Inexpensive valuations at 13.5X FY2013E mature business EPS estimates; the risk is continued
inexpensive valuations given operating losses from emerging markets for some time.
We view the street’s fears on DBCL market expansions as significantly overblown given the track
record of the company. Nonetheless, we do not presume any value-addition from new markets in
our TP (implied 19X FY2013E mature market EPS). The concern on potential challenges of
simultaneous expansion in two large markets (Maharashtra and Bihar) was put to rest by the
deferment of Bihar expansion; the focus on Maharashtra expansion (operating breakeven) is the
prudent approach, in our view. The operating losses in emerging markets have also been impacted
by the challenging environment (advertising, currency).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
DB Corp (DBCL)
Media
Peak investment quarter. DBCL reported apparently weak 2QFY12 EBITDA of Rs771
mn (-19% yoy). However, adjusted for Rs58 mn of forex losses (un-hedged ECB
exposure), EBITDA of Rs829 mn (-13% yoy) was in line with expectations. Mature
business EBITDA came in at Rs1.07 bn (+2% yoy) in a challenging environment;
emerging business losses increased to Rs231 mn (+189% yoy). Retain BUY with
FY2013E TP of Rs320 (Rs330 previously); inexpensive valuations at 13.5X FY2013E
mature business EPS estimates, given new expansions, are likely to be value-accretive in
time.
2QFY12 results appear weak given Rs58 mn forex losses
DBCL reported optically weak 2QFY12 EBITDA of Rs771 mn (-19% yoy) led by forex losses of
Rs58 mn (un-hedged ECB exposure) despite reasonably robust 16% yoy advertising revenue
growth. Adjusted EBITDA of Rs829 mn (-13% yoy) was in line with expectations, impacted by
Rs150 mn increased losses in emerging markets (Jharkhand/Maharashtra).
DBCL reported 2QFY12 EBITDA of Rs1.07 bn (+2% yoy) in mature markets led by robust
leading position across MPCG (MP-Chhattisgarh), Rajasthan, CPH (Chandigarh-Punjab-Haryana)
and Gujarat, in a challenging advertising environment.
2QFY12 may be the peak investment quarter with Rs231 mn of emerging market losses at
~22% of mature market earnings of Rs1.07 bn.
Retain BUY led by mature market franchise; FY2013E TP of Rs320
Retain BUY with FY2013E TP of Rs320 (Rs330 previously); our FY2012E-13E earnings estimates are
revised to Rs11.6 (Rs13.0 previously) and Rs14.1 (Rs14.2) led by (1) one-off forex losses (overhead
costs) in FY2012E, (2) reduced advertising revenues and (3) revised Rs/US$ assumptions impacting
newsprint prices; however, the latter may be negated by a reported modest decline in domestic
newsprint prices (80% consumption share in DBCL). Additionally, we highlight that the apparent
decline in EPS to Rs11.6 in FY2012E from Rs14.1 in FY2011 has to be viewed against (1) forex
losses in FY2012E and (2) tax savings from accrued losses of FM radio business in FY2011.
Inexpensive valuations at 13.5X FY2013E mature business EPS estimates; the risk is continued
inexpensive valuations given operating losses from emerging markets for some time.
We view the street’s fears on DBCL market expansions as significantly overblown given the track
record of the company. Nonetheless, we do not presume any value-addition from new markets in
our TP (implied 19X FY2013E mature market EPS). The concern on potential challenges of
simultaneous expansion in two large markets (Maharashtra and Bihar) was put to rest by the
deferment of Bihar expansion; the focus on Maharashtra expansion (operating breakeven) is the
prudent approach, in our view. The operating losses in emerging markets have also been impacted
by the challenging environment (advertising, currency).
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