Premium valuations to sustain
We initiate coverage on DB Corp with a BUY rating and believe the company’s
leadership footprint in high growth markets across North, Central and Western
India offers robust growth in regional advertising market, economies of scale,
larger share of national advertising and lower newsprint purchase cost. Focus on
urban and monetizable readers has helped the company achieve industry leading
margins. It was able to expand on the back of strong cash flows, management
focus and well defined plan on gaining readership and becoming number one
from the first day of launch. We believe premium valuations will sustain given the
company’s industry leading revenue growth, strong profitability, healthy balance
sheet and strong return ratios against competitors.
Leadership inkey regional and high growth markets:We believe DB Corp is one
of the few players to reap success and build scale in every market it is present.
Large footprint and geographical reach offer robust growth in regional advertising
market, economies of scale, larger share of national advertising and lower
newsprint purchase cost. Even distribution of readership across states helps the
company mitigate the risk of slowdown in any particular market. Rising advertiser
interest in tier II and tier III cities, we believe will help DB Corp as it is strategically
located in high growth markets of MP, Gujarat, Chandigarh, Maharashtra, Haryana
and Chhattisgarh that have above national average GDP growth.
Strong focus on urban & monetizable readers:DB Corp has strategically planned
the expansion of its readership base to urban and semi-urban consumers where
readers can be monetised and attract advertisers’ interest. It has always stayed
away from chasing overall readership which cannot be monetised in the medium
term and hence is the leader in urban readership on pan India basis, even ahead of
English dailies. Hence, DB Corp is overall No2 player in Rajasthan but is a leader in
key urban markets by a vast majority. Similarly, Divya Bhaskar is overall No2 player
in Gujarat but the leader in the biggest urban market of Ahmedabad.
Strong organic expansion track record: We believe the company has been able
to successfully expand on the back of its strong cash flows, management focus and
well defined plan on gaining readership and becoming number one from the day
of launch. It has repeatedly achieved No1 or No2 positions in most markets post
launch on the back of its unique strategy of reaching out to readers, conducting
surveys pre-launch, strong editorial backing along with marketing campaigns. It
targets high growth markets with low print penetration coupled with complacent
incumbents. DB Corp has been the most aggressive player in terms of expansion in
the last decade and in the past four years the company has started operations in
Jharkhand and Maharashtra and is poised to launch its Bihar operations soon.
Valuations & Risks: DB Corp is currently trading at 19.4x FY14E and 16.8x FY15E
EPS of Rs15.2 and Rs17.6 respectively. We believe these premium valuations will
sustain, given the company’s industry leading revenue growth, strong profitability,
healthy balance sheet and strong return ratios against competitors. On the back of
diversified readership across multiple states and languages, dominant position in
fast growing markets, proven execution & expansion strategy and strong cash
flows, we initiate coverage on the stock with a BUY rating and target price of Rs380
(19x Dec 2015 EPS). Key risk to our call would be increase in newsprint prices,
aggressive competition and execution risk in new markets
��
We initiate coverage on DB Corp with a BUY rating and believe the company’s
leadership footprint in high growth markets across North, Central and Western
India offers robust growth in regional advertising market, economies of scale,
larger share of national advertising and lower newsprint purchase cost. Focus on
urban and monetizable readers has helped the company achieve industry leading
margins. It was able to expand on the back of strong cash flows, management
focus and well defined plan on gaining readership and becoming number one
from the first day of launch. We believe premium valuations will sustain given the
company’s industry leading revenue growth, strong profitability, healthy balance
sheet and strong return ratios against competitors.
Leadership inkey regional and high growth markets:We believe DB Corp is one
of the few players to reap success and build scale in every market it is present.
Large footprint and geographical reach offer robust growth in regional advertising
market, economies of scale, larger share of national advertising and lower
newsprint purchase cost. Even distribution of readership across states helps the
company mitigate the risk of slowdown in any particular market. Rising advertiser
interest in tier II and tier III cities, we believe will help DB Corp as it is strategically
located in high growth markets of MP, Gujarat, Chandigarh, Maharashtra, Haryana
and Chhattisgarh that have above national average GDP growth.
Strong focus on urban & monetizable readers:DB Corp has strategically planned
the expansion of its readership base to urban and semi-urban consumers where
readers can be monetised and attract advertisers’ interest. It has always stayed
away from chasing overall readership which cannot be monetised in the medium
term and hence is the leader in urban readership on pan India basis, even ahead of
English dailies. Hence, DB Corp is overall No2 player in Rajasthan but is a leader in
key urban markets by a vast majority. Similarly, Divya Bhaskar is overall No2 player
in Gujarat but the leader in the biggest urban market of Ahmedabad.
Strong organic expansion track record: We believe the company has been able
to successfully expand on the back of its strong cash flows, management focus and
well defined plan on gaining readership and becoming number one from the day
of launch. It has repeatedly achieved No1 or No2 positions in most markets post
launch on the back of its unique strategy of reaching out to readers, conducting
surveys pre-launch, strong editorial backing along with marketing campaigns. It
targets high growth markets with low print penetration coupled with complacent
incumbents. DB Corp has been the most aggressive player in terms of expansion in
the last decade and in the past four years the company has started operations in
Jharkhand and Maharashtra and is poised to launch its Bihar operations soon.
Valuations & Risks: DB Corp is currently trading at 19.4x FY14E and 16.8x FY15E
EPS of Rs15.2 and Rs17.6 respectively. We believe these premium valuations will
sustain, given the company’s industry leading revenue growth, strong profitability,
healthy balance sheet and strong return ratios against competitors. On the back of
diversified readership across multiple states and languages, dominant position in
fast growing markets, proven execution & expansion strategy and strong cash
flows, we initiate coverage on the stock with a BUY rating and target price of Rs380
(19x Dec 2015 EPS). Key risk to our call would be increase in newsprint prices,
aggressive competition and execution risk in new markets
No comments:
Post a Comment