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Ad growth in line with expectations….
• DB Corp’s Q2FY15 results were in line with our estimates with
revenue growth of 9.6% YoY to | 480.2 crore, led by higher ad
revenues and growth in the radio business despite a lower print ad
growth of 7.1% (vs. estimated 7.8% YoY) to | 331.9 crore
• EBITDA came in at | 123.5 crore (vs. estimates of | 115.3 crore), due
to lower newsprint costs and a better operating performance from
emerging editions as well as reduced losses in the digital business
resulting in an EBITDA margin of 27.5%, up 447 bps QoQ
• PAT was at | 68.1 crore (vs. our estimate - | 66.9 crore), up 13.2%
YoY. Higher PAT came in despite higher tax & depreciation expense
as the impact was offset by higher operating leverage
DB Corp – Focus on regional markets
DB Corp, one of the largest print media companies, publishes eight
newspapers including Dainik Bhaskar and is the second most read
newspaper in the country with average issue readership (AIR) of about
19.8 million (IRS December,2012). It continues to dominate the vernacular
market in both urban and rural areas and is the No. 1 player in several
territories namely Chandigarh, Haryana, Madhya Pradesh, Chhattisgarh,
etc. The company launched editions in Maharashtra and Jharkhand in the
past two years. Recently, DB Corp also forayed into Bihar with the launch
of an edition in Patna city. The company expects to achieve EBITDA
break-even in some editions in Maharashtra and Jharkhand by the end of
the financial year. The consistent growth in its circulation revenues
speaks volumes about its ability to take price hikes. Going ahead, we
expect circulation revenues to grow 6.8% over FY14-16E to | 368.9 crore
in FY16E from | 323.2 crore in FY14.
Ad growth turnaround seen in FY14, trajectory expected to continue
The company has been able to grow its advertisement revenue at 8.4%
CAGR in FY11-13 despite the economic slowdown. Vernacular advertisers
and the rural economy remained relatively insulated, resulting in superior
ad growth for DB Corp. Moreover, its rapidly expanding footprint across
vernacular regions also ensured higher ad growth (both price and volume
led). Going ahead, we expect DB Corp to maintain ad revenue growth of
12.2% over FY14-16E to | 1784.4 crore in FY16E from | 1417.8 crore in
FY14. This is expected to happen on the back of a gradual turnaround in
economic activity and maturing of newly launched editions.
Focuses strongly on radio and digital business
DB Corp operates the radio business under the brand name “My FM” in
17 cities. The business, though small, with a yearly revenue of about
| 80.2 crore as on FY14 has exhibited decent YoY growth of 19.9% in
FY14. Going ahead, we expect radio business revenues to grow at 16.9%
CAGR in FY14-16E to reach | 109.6 crore by FY16E. The management is
also very bullish on its digital business owing to the 400 million page
views and 14 million unique visitors on its digital properties. The revenue
from the segment is very small currently at | 6.3 crore in the quarter.
However, we believe the same will pick up in the coming years.
Maintain BUY…
DB Corp being a regional player that is rapidly expanding its footprint
commands a premium over national players. We expect consolidated
revenue and EBITDA growth of 10.5% and 20.1%, respectively, over
FY14-16E. We continue to maintain our BUY rating, valuing it at a 17x P/E
multiple, at a target price of | 411.
LINK
http://content.icicidirect.com/mailimages/IDirect_DBCorp_Q2FY15.pdf