Q3FY13 Result Update Jagran Prakashan Buy:: - Centrum

Q3FY13 Result Update

Jagran Prakashan

Buy

Target Price: Rs125

CMP: Rs108

Upside: 14%

Healthy expectations ahead

Jagran Prakashan posted 7.7%YoY revenue growth on the back of 7.1% ad growth led by volumes and 12.2% circulation growth. Operating profit was up by 7% on the back of mere 3.9%YoY increase in raw material cost and higher than expected admin cost. Rs55mn forex loss muted PAT growth which was up 59% YoY on the back of lower taxes. Maintain BUY.

m  Q3FY13 results broadly in-line: Jagran Prakashan posted 7.7% topline growth in Q3FY13 to Rs3489mn on 7.1% growth in advertising. Circulation growth was at 12.2%. Operating profit was up by 7% as the company witnessed 16bps margin compression due to higher admin cost. PAT was higher by 59% as the company did not pay any tax during the quarter due to accumulated losses following Nai Dunia acquisition. Forex loss was at Rs55mn during the quarter due to depreciating Rupee.

m  Ad growth to bounce back in FY14E: The Company posted healthy 7.1% YoY ad growth on the back of festive season demand. Growth was slightly muted on the back of high base of Q3FY12 along with severe cold in the last week of December. The share of national ads continued to be at 40%, similar to the last quarter. Flanking papers like I-next and City Plus contributed to grow by 30% and 32% respectively. Hence we expect the company to post 7% YoY growth in FY13E and 14% in FY14E.

m  Reducing losses in acquisitions: Nai Dunia posted 21% YoY growth in ads on the back of strong synergies with Jagran. Operating losses during 9MFY13 was Rs42mn and for the full year we believe the losses would be under Rs75mn against Rs250mn in FY12. For Mid-Day, advertising growth was 3% with cash loss at Rs30mn for 9MFY13 and the management expects to break even in the next one year. We remain confident on turnaround of these publications with the uptick in economy from FY14 onwards.

m  Margins to expand: Margins during the quarter declined by 16bps on the back of high admin cost. Raw material expenses were under control due to lower newsprint cost, change in mix, lower pagination. We expect the margins to expand on the back of flat newsprint prices going ahead and turnaround of new acquisitions.    

m  Estimates lowered; Maintain BUY: We have marginally lowered our FY13E/FY14E estimates on the back of higher admin & other expenditure coupled with high interest cost. The stock is currently trading at 13.3x and 14.8x FY13E and FY14E respectively. We value the company at 15x Sept 2014 with our target price of Rs124 and maintain BUY rating on the stock. We believe that the ad growth has bottomed out and expect margin expansion ahead on the back of expectations of flat newsprint prices and turnaround in acquisitions of NaiDunia and Midday.

Thanks & Regards, 

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