Media - Jagran set to UP tempo; sector update:: Edelweiss,

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��

With assembly elections set to be held in five states—Uttar Pradesh (UP), Uttarakhand, Punjab, Goa and Manipur—in Q4FY12, we expect political parties’ election related ad expenses to enhance ad revenues of some print media companies especially Jagran Prakashan (JPL). Unlike Bihar elections which had a single strong contender, the latest UP elections are expected to be keenly contested due to a four-horse race, which will pump up ad expenses. Given the current slowdown in the ad environment, elections in the five states will give some respite to print companies present in these states. We expect JPL to add ~INR150-180mn additional revenue because of the elections. We remain positive on JPL due to its significant presence in Uttar Pradesh and Uttarakhand.

Political parties partial to propaganda in print media

Print media remains the primary spending medium for political parties, followed by television and radio. Congress, BJP, BSP and SP are known to focus on print media for election advertising. For regional elections, print and radio have been extensively used earlier, whereas TV is more of a national medium. Typically, parties are charged more than twice the normal advertising rate. Though, government ad expenditure is not allowed post declaration of poll dates, the positive impact of ad revenues from political parties will lessen the negative impact of lack of government expenditure. However, we believe given the softness in the ad environment, print companies will look forward to the additional revenue and will be willing to accept ads at competitive prices.

Keenly contested elections to spur publicity expenses

Unlike the Bihar elections, which had a single strong contender, the latest UP elections are expected to be keenly contested due to a four-horse race, which will pump up publicity expenses of political parties. Out of the five states going to polls, UP will see the maximum ad expenses due to its huge territory and political significance. The 2007 elections in Punjab, Manipur, UP, Uttarakhand and Goa had resulted in ad spends of ~INR1,154mn by political parties. With inflation and expectations of a keenly contested election, we anticipate ad spends to cross INR2,000mn this time around. However, due to the ongoing economic slowdown, political parties will aim to squeeze ad rates, which may provide a downside risk to our estimates.

Jagran Prakashan to be prime beneficiary amongst listed players

As per IRSQ32011, Jagran Prakashan maintains the numero uno status in UP, the state which will see the maximum ad spends by political parties. In comparison, Uttarakhand and Punjab are likely to be much smaller markets. The paper is second in terms of Average Issue Readership (AIR) in Uttarakhand and fifth in Punjab. We expect it to add ~INR150-180mn revenues (net of negative impact of lack of government expenditure) from UP elections. In the previous UP elections in 2007, Jagran Prakashan had pocketed net revenue of ~INR70mn.