DB Corp.: Profitability compensates for soft revenue growth:: Kotak Securities

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Profitability compensates for soft revenue growth. DB Corp.’s 3QFY15 PAT of
`1 bn (+11% yoy) was in line with estimates. EBITDA margin of 33.3% was the highest
in 18 quarters, aided by a fall in newsprint costs (-2% yoy) and a tight leash on other
operating costs (+5% yoy). The subdued 5% growth in print ad revenues was expected,
given a high base (election benefits last year). The improved economic outlook has not
triggered print ad-spend growth yet, but newsprint tailwinds and a check on costs
protected earnings. We expect ad revenue growth to improve in coming quarters. This,
with a favorable cost environment, is expected to drive 20% EPS CAGR over FY2015-
17. We retain ADD, revise TP to `425 (from `375) at 16X December 2016E EPS.

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Reduce DB CORP -Target: RS.404 :: Kotak Sec,report

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DB CORP
PRICE: RS.399 RECOMMENDATION: REDUCE
TARGET PRICE: RS.404 FY16E P/E: 17.8X
DB Corp's 3QFY15 results are broadly in line with our expectations, even as
advertising revenue growth has disappointed. The company has reported a
robust EBITDA growth regardless, on account of decline in newsprint prices
- something that is likely to sustain for the next few quarters. Further, we
believe that while advertising expenditures have not improved already,
there is reason to be positive on advertising revenue growth for the
industry going forward (likelihood of better consumer spending). We raise
our price target to Rs 404 (prior target Rs 338), or 18X FY16E PER, on account
of improving visibility for earnings on newspaper publishers. While
retaining our negative stance on DB Corp, we raise the recommendation to
REDUCE (from SELL)

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Margins expand in quarter…. • DB Corp :: ICICI Securities, report

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Buy DB Corp :: ICICI Securities

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Strong ad growth continues We maintain BUY rating on DB Corp :Centrum

Strong ad growth continues
We maintain BUY rating on DB Corp and continue to believe the company will deliver
industry leading ad growth and margins as seen in Q3FY14 results where it posted 18.2%
YoY growth in ad revenues (3% led by state elections) with 75% from increase in yield.
Operating margins increased by 278bps to 29.9%, despite 19.1% YoY increase in RM cost,
on the back of lower employee cost and healthy operating leverage. We believe DB Corp is
well placed to capture the upside on the back of diversified readership across multiple
states and languages, dominant position in fast growing markets, proven execution &
expansion strategy along withstrong cash flows.
 Q3FY14 results above expectations: The company posted 18.1% YoY growth in sales to
Rs5182mn (est of Rs4928mn) on the back of print ad growth of 17.6% during the quarter and
13.9% circulation growth. Operating profit was up 30.2% YoY to Rs1551mn (est of
Rs1388mn) with strong operating margin expansion of 278bps to 29.9% with mere 4.6% YoY
increase in employee cost while emerging editions posted losses of only Rs55mn. Adj PAT
was up 33.7% YoY to Rs945mn on the back of strong operating performance.
 Ad growth surprises positively: The company posted blended ad growth of 18.2% with a
growth of 17.6% in print business and 25% in radio. 3% growth was led by state elections in
MP, Rajasthan and Chhattisgarh and 75% from yield improvement. National ad market
contributed 35% to ad revenues with sectors such as FMCG, auto, lifestyle and hypermarkets
posting healthy growth. In local markets, real estate posted healthy growth following good
monsoons. Management expects the ad growth momentum to continue due to national
elections and strong yield improvement.
 Margins set to grow: In the quarter, operating margins went up 278bps to 29.9% despite
19.1% YoY increase in RM cost. While newsprint prices increased by 11% YoY on the back of
Rupee depreciation, lately we have seen $15/MT drop in prices. Employee expenses rose by
mere 4.6% YoY as the company rationalized manpower needs. Loss from emerging editions
was only Rs55mn (Rs45mn from Bihar launch) which also helped in margin expansion.
 Valuation & Risk: We increase our earnings by 2.1%/2.7% for FY14/FY15 on the back of
higher ad & circulation growth while we have also increased our RM cost assumptions. We
maintain BUY rating on the stock with a target price of Rs390 (19x Dec 15). We believe DB
Corp is well placed to capture the upside from diversified readership across multiple states
and languages, dominant position in fast growing markets, proven execution & expansion
strategy and strong cash flows. Downside risk to our call would be increase in newsprint
prices, aggressive competition and execution risk in new markets

Premium valuations to sustain; Initiate coverage on DB Corp with a BUY:: Centrum

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

DB Corp -- BUY :: Business Line

DB Corp: Print advertising cyclicality (from high base) hurts 1QFY13 : Kotak Sec, PDF link

DB Corp (DBCL)
Media
Print advertising cyclicality (from high base) hurts 1QFY13. DB Corp reported weak
1QFY13 financials with EBITDA at Rs850 mn (-15% yoy); the negative variance resulted
from weak national advertising (declined ~15% yoy) in (1) mature markets given high
base of 1QFY12 (~20% yoy growth then) and (2) dependence of print advertising on
cyclical sectors such as BFSI, durables and real estate (surprising in DBCL markets). BUY
but with reduced upside and 12-month forward FV of Rs260 (Rs290 previously) given
(1) advertising down-cycle is sharper-than-previously-envisaged and (2) expansions likely
to take more time to be completed and profitable.

Angel Broking -DB Corp - RU4QFY2012- Result Updates - PDF link

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DB Corp - RU4QFY2012

Buy DB Corp; Target :Rs 230 ::ICICI Securities, PDF link

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http://content.icicidirect.com/mailimages/ICICIdirect_DBCorp_ManagementMeet_April2012.pdf



P r i n t   m e d i a   t o   g r o w   s t ro n g ;   u n l i k e   i n   W e s t …
We recently met the management of DB Corp. They indicated that the
growth drivers for print media in the country would be low newspaper
penetration, rising literacy levels, rising disposable income and low
internet penetration. The management attributed the strength of print
media in India to a different business model from the West with
subsidised cover prices and home delivery of newspapers. DB Corp,
being one of the top Hindi newspapers with a leadership position in
Madhya Pradesh and Chhattisgarh (MPCG), Haryana, Chandigarh, having
considerable market share in Gujarat, Punjab and fast growing new
launches in Jharkhand and Maharashtra is well poised to outclass
industry growth.
Better content to fetch growth
DB Corp is the strong market leader in MPCG, Chandigarh and Haryana
and has a strong presence in Rajasthan and Gujarat. The new editions
launched by the company in Jharkhand and Maharashtra have also
received a very good response. The management attributed the success
to the quality of content of the  company. The company also boasts
highest readership in urban areas and Sec A&B making it more preferred
by advertisers. The management is confident of outclassing the estimate
of growth at 12-14% CAGR for print media in India.
V a l u a t i o n
FY12 has been characterised by low ad growth due to a slowing
economy. However, the long term outlook for Indian GDP and, hence, ad
revenue growth looks positive. We expect the company to post an ad
revenue growth of 12% in FY13. At the CMP of | 205, the stock is trading
at 19.1x FY12 EPS and 14.3x FY13 EPS. We have valued the stock at 16x
FY13 EPS to arrive at a target price of | 230 implying an upside potential
of 12%. We continue to rate the stock as BUY


Outlook & Valuation
The management has indicated that the print media in India would grow
robustly unlike the West due to a different business model from the West
with subsidised cover prices and home delivery of newspapers. DB Corp,
being one of the top Hindi newspapers with leadership position in
Madhya Pradesh and Chhattisgarh (MPCG), Haryana, Chandigarh, No 2
position in Rajasthan and having considerable market share in Gujarat,
Punjab and fast growing new launches in Jharkhand and Maharashtra, is
well poised to outclass the estimated industry growth of 12-14%.
FY12 has been characterised by low ad growth due to a slowing
economy. However, the long term outlook for the Indian GDP and, hence,
ad revenue growth looks positive. We expect the company to post an ad
revenue  growth  of  12%  in  FY13. At  the  CMP  of  |  208, DB  Corp  is  trading
at 19.1x FY12 EPS and 14.3x FY13 EPS. We have valued the stock at 16x
FY13 EPS to arrive at a target price of | 230 implying an upside potential
of 12%. We continue to rate the stock as BUY.

Buy DB Corp; Target : Rs 230 ::ICICI Securities

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R e s u l t s   i n   l i n e ;   o u t l o o k   u n c e r t a i n …
DB Corp reported its Q3FY12 numbers, which have been in line with our
estimates. Revenues for Q3FY12 stood at | 395.6 crore, up by 13.6% YoY
led by an 8.6% growth in ad income to | 305.9 crore. EBITDA for the
quarter stood at | 101.8 crore against our estimate of | 98.9 crore. The
EBITDA margin stood at 25.7% contracting by 724 bps on account of onetime expenses of | 2.1 crore on the launch in Maharashtra and the impact
of operating losses of new editions along with | 2.8 crore of forex loss.
PAT for the quarter fell 16.0% YoY to | 55.4 crore against our estimate of
| 56.1 crore mainly due to a forex loss of | 5.9 crore, which was not
accounted for in EBITDA.
Highlights of the quarter
In line with the industry, DB Corp posted subdued ad growth of 8.6% YoY
to | 305.9 crore. The print ad revenue posted modest growth of 6.8% YoY
to | 287.2 crore whereas the radio business grew 21.7% YoY to | 15.7
crore. The management attributed the subdued growth in print to the
slowing economy causing national advertisers to cut down on their ad
spends. Retail ads, however, grew ~ 11.0% YoY. Circulation revenue
posted a strong growth of 16.7% YoY to | 63.0 crore on the back of
increased circulation and a price hike Madhya Pradesh and Haryana.
V a l u a t i o n
While national advertisers have cut down their ad spends, retail ads have
grown ~11%. Due to an uncertain economic outlook pressurising the ad
growth in the future and menacing newsprint prices, we have cut our
estimates of FY12 and FY13 EPS from | 11.2 to | 10.7 and from | 15.5 to |
14.4, respectively. At the CMP of | 188, the stock is trading at 17.5x FY12
EPS and 13.0x FY13 EPS. We have valued the stock at 16x FY13 EPS to
arrive at a target price of | 230 implying an upside potential of 23%. We
continue to rate the stock as BUY

DB Corp (Buy, PO Rs285) 􀂄 BofA Merrill Lynch,

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DB Corp (Buy, PO Rs285)
􀂄 We forecast ad growth of 13% yoy during FY12E and 15% yoy during
FY13E, led by strong growth in retail advertisers. With a strong presence in
many of the key markets such as Madhya Pradesh, Chattisgarh, Harayana,
Rajasthan and Gujarat, DBCL’s revenue mix is well diversified compared to
peers and is likely to be less impacted, in our view.
􀂄 We expect ad growth to accelerate over the next two years given the recent
expansion in key markets such as Maharashtra and Jharkhand. DBCL
should be able to monetize on its recent expansion in Maharashtra and
Jharkhand given the readership data will be available from FY13 onwards for
Jharkhand and from FY14 for Maharashtra.
􀂄 We expect EBITDA margins to recover from FY13E, led by lower losses in
Jharkhand/Maharashtra, a potential delay in its plan to launch in Bihar to 4Q
FY13E and reduction in newsprint costs.
􀂄 The stock trades at 8x our FY 2013E EV/ EBITDA, at the lower end of its
trading band of 8-12x. Even assuming that ad growth declines to 10% YoY in
FY13E vs. an estimated 15%, we see 10% potential upside to the stock. Buy
with a PO of Rs285.

DB Corp: Buy :: Business Line

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As a strong play on the domestic consumption story, more so in the rapidly growing Tier- 2 cities and towns, DB Corp offers an attractive investment option over the medium-term.

Investors with a two-year horizon can buy the shares of the company, given the continuing sound pace of advertising revenues growth and improvement in circulation.

At Rs 216, the share trades at 15 times its likely per share earnings for FY13, which is lower than the valuation that the company has historically commanded and slightly below that of its peers such as Jagran Prakashan.

An expanding share of resilient regional advertising, leadership in circulation in key markets, and increase in ad rates to prop realisations are key positives for the company.

In FY11, DB Corp's revenues increased 19.1 percent to Rs 1250.8 crore, while net profits expanded 41.4 percent to Rs 258.5 crore.

The momentum on the revenue front has continued into the first half of the current fiscal with a 16.7 per cent rise. However, profits have fallen by over 25 per cent as a result of higher newsprint costs and increase in selling expenses due to edition launches.

GROWTH IN SMALLER CITIES

DB Corp operates several newspapers, the main one being Dainik Bhaskar which is circulated in 11 Sates with 36 editions.

It also publishes a Gujarati newspaper in Gujarat and Maharashtra as well as a Hindi business daily in six States. The total readership for its newspapers is 18.1 million.

Dainik Bhaskar, the second most read Hindi Newspaper in India, is among the top papers read in Madhya Pradesh, Rajasthan, Chandigarh, Punjab and Haryana.

In Gujarat too, its regional language newspaper is among the most read. All these States contribute to the operating profits of the company. Given that growth in Tier-2 and Tier-3 cities and towns is increasingly driving growth for several sectors, the company's strong penetration in these markets would enable it to cash in on the trend.

RETAIL ADVERTISING STRONG

DB Corp derives around 80 per cent of its revenues through advertising. Despite concerns of a slowing economy, the company has seen an 18 per cent growth in advertising revenues in the first half of this fiscal over the previous year, a reflection of its strong presence in growing markets.

The other key aspect is that DB Corp derives around 62 per cent of its advertising from regional or retail advertisers. This segment is generally quite resilient to any slowing macro indicators. Evidence to this fact is the growth that retail advertising had even in the troubled 2008-09 years.

Retail (or regional or local) advertising has grown 20 per cent for the company even in the recent September quarter, while national advertising grew in single digits.

Sectors such as education, automobiles and lifestyle continue to be strong for the company. Apart from advertising, circulation too has picked up for the company.

In the first half of FY12, circulation revenues have grown by 9.3 per cent, with double-digit growth in the recent quarter. The company may increase cover price in key markets such as Madhya Pradesh, which could prop revenues further. The other key trend at a macro level is that DB Corp could benefit regional newspapers such as Dainik Bhaskar.

The premium that English language newspapers used to command in advertisingvis-à-vis regional ones is shrinking.

From 12 times higher rates that English Newspapers commanded in 2003, the number has come down to 4.8 times in 2010, according to a recent FICCI KPMG report.

COST PRESSURES

With newsprint costs spiralling, DB Corp's raw material costs, as a percentage of revenues, rose from 30 to 35 per cent over the past three-four quarters. In the recent September quarter, DB Corp also had to contend with a steep depreciation of the rupee against the dollar to nearly Rs 50 a dollar levels.

Since the company imports 20-22 per cent of its newsprint, it had to contend with increased outflow on this count. Also, with foreign currency loans on in its books, the rupee volatility has also meant marked-to-market forex losses for the company, though it has been only around Rs 6 crore in the recent quarter.

Launch of five new editions in Maharashtra recently also led to increase in newsprint consumption.

DB Corp, however, anticipates newsprint prices to remain steady or even decline, going forward. Also, with no new launches planned over the next few quarters, costs too should be under control.

DB Corp- Q2FY12: Ad Growth Holding Up Well, Raw Materials, New Edition Losses Pare Profit Growth : JPMorgan,

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DBCL 2Q earnings declined 39%YOY - while losses in the new editions were inline
with our expectations, higher newsprint costs and higher interest were the key
negative surprises. Advertising growth held up well, up 16% yoy, despite sharp
slowdown in national advertising. DBCL is looking to consolidate its new
editions, with no new launches planned in 2HFY12.
 Local markets help sustain advertising growth. 16% ad growth in 2Q is
driven largely by local retail markets (20%+ growth), while national ad
continue to remain sluggish (<10%). Management indicated that national
advertising remains muted despite the onset of festive season, with large MNCs
cutting down on ad spends. While management has a cautious outlook, they
indicated that DBCL should be able to sustain ad growth rates similar to 2Q.
 New launches ramping up well, consolidation ahead. New editions launched
in 4 cities of Maharashtra are scaling up well and DBCL expect to complete the
Maharashtra roll out by end 2012. Entry into Bihar has been put on hold owing
to uncertain growth environment and management will re-assess the decision in
Mar 12. Over the next 2 quarters, management is looking to consolidate
operations in Maharashtra, with new edition launches planned only for FY13E.
 Non-print, radio faring well with 2Q top-line growth of 29% YoY and
EBITDA growth of 198% YoY. Digital business crossed more than 100MM
page views per month in September helped by expanded presence through
mobile platforms. Management see significant synergies between the print and
non print, largely from advertising sales.
 Q2FY12 result highlights. Revenues up 16% YoY driven by ad revenues
(+16% YoY), circulation (+13% YoY) and Radio (+29% YoY). EBITDA
margins declined 960bps YoY, with new edition losses accounting for 650bps of
the decline. Net profits declined 39% YoY pared by Rs58.2MM MTM FX loss.
 Maintain OW. We cut FY12/13E EPS estimates by 15%/9% factoring in higher
newsprint costs and higher losses for new launches. We cut our PT to Rs280,
rolled forward to Sep-12 and based on 18x Sep13E P/E. DBCL has managed to
sustain strong ad-growth in a challenging environment and its successful
expansion track record gives us confidence on its plans in Maharashtra. Key
risks include rising competitive intensity, failure to scale up in new markets,
increase in newsprint costs and further slowdown in growth.

DB Corp: Peak investment quarter :: Kotak Sec,

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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.

D.B. Corp Management meeting: Advertising Growth Moderating, Maharashtra Roll Out on Track:: Takeaways from J.P. Morgan India Emerging Opportunities Access Days

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 Advertising growth moderating: According to management, advertising
growth rates are moderating – key areas of stress are autos, lifestyle and real
estate segments, while education, govt., health care are holding on. Management
noted that the bright spot where print advertising in tier II cities is picking up is
premium FMCG products. Management expects print advertising to grow by
12%-14% and DBCL to register 14%-15% ad growth.
 Recent correction in newsprint prices bodes well: Domestic newsprint prices
have corrected by 2%-3% recently, while management was expecting another
5% correction, the chances of that look slim now, given recent Rupee
depreciation vs the US$ (newsprint prices are on US$ parity).
 Maharashtra roll-out on track: DBCL is launching 4th edition in Maharashtra
in October and expects full roll out by next year, with 8-9 editions. According to
management, Maharashtra operations will break even in three years, while
Jharkhand will take four years to break even. Management expects Rs300-
350MM loss in Maharashtra in FY12E, which should fall to Rs200MM next
year, while loss in Jharkhand should fall from Rs200-250MM to Rs100MM next
year.
 Looking to bid for Phase III radio licenses: Management expect the bidding
process to start in March-12, and will bid for licenses in 25-30 tier II and III
locations, where they have newspaper operations. Management expects radio to
compliment their print operations and see significant synergies between the two,
largely from advertising sales. Management expects capex on radio to be low, as
all most of their studios will be based on the existing printing locations.
 Valuation, price target and risks: DBCL stock has corrected by ~30% YTD on
concerns of ad slowdown. The stock is now trading at 12.4x FY13E P/E on our
estimates that assume ad growth slowing to 9% in FY13E, and is pricing in the
potential slowdown in ad growth. Given DBCL’s successful track record of
expansion into new markets, we are confident of it delivering on its plans in
Maharashtra, which we believe will drive stock performance from here. Our
Mar-12 PT of Rs290 is based on 18xFY13E P/E. Key risks include rising
competitive intensity, failure to scale up in new markets, increase in newsprint
costs and further slowdown in economic growth.

BUY DB Corp; Target Price `274 ::Angel Broking,

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DB Corp. (DBCL) reported modest performance on the revenue front and weak
performance on the earnings front. The company’s top-line growth was driven by
a mix of ad revenue growth and circulation revenue growth. On account of new
launches in Maharashtra and Jharkhand, earnings for the quarter declined.
We maintain our Buy recommendation on the stock.
Key highlights for the quarter: For 2QFY2012, the company’s top line grew by
17.6% yoy (flat qoq) at `354cr. Consolidated ad revenue for the quarter grew by
15.9% yoy to `274cr. The company’s circulation revenue grew by impressive 13%
yoy and 5.8% qoq on account of new edition launches in Maharashtra and
Jharkhand. DBCL reported a weak set of numbers on the earnings front primarily
on account pre-operative expenses of `9.9cr and operating losses on the three
editions launched in the above-mentioned states. The company reported a 37.1%
yoy and 34.1% qoq decline in its recurring earnings. Recurring PAT for the quarter
stood at `40cr. Operating margin during 2QFY2012 fell steeply by 981bp yoy
and 657bp qoq on account of new edition losses as well as forex losses.
Outlook and valuation: We have revised our earnings estimate downwards
considering the higher-than-anticipated increase in newsprint price due to
increased circulation, forex fluctuations impact and higher number of loss-making
editions. At the CMP, DBCL is trading at 14.9x FY2013E consolidated EPS of
`15.5. We maintain our Buy view on the stock with a revised target price of `278,
based on 18x FY2013E earnings, which is in-line with its historical trading
average since its listing. Downside risks to our estimates include 1) any further rise
in newsprint prices, 2) competition becoming fierce and 3) higher-than-expected
losses/increase in the breakeven period of the new launches.

DB Corp. : ::: 2QFY2012 earning review by Angel Broking,

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DB Corp.
DB Corp. reported its 2QFY2012 numbers with consolidated revenue growth
at 17.6% yoy and flat qoq to `354cr (`301cr/`354cr). Advertising revenue
grew by 15.9% yoy but declined by 3.4% qoq to `274cr (`237cr/`283cr),
while circulation revenue grew by 13.0% yoy/5.8% qoq to `60cr (`53cr/`57cr)
on account of launch of new editions in Maharashtra and Jharkhand.
Recurring consolidated earnings declined by 37.1% yoy and 34.1% qoq to
`40cr (`64cr/`61cr). The company also witnessed a 981bp yoy and 657bp
qoq decline in operating margin, which stood at 21.8%, due to edition
launches in Maharashtra and Jharkhand and loss on foreign exchange.
A detailed note would be released post the conference call with the
management today. The stock is currently under review.
The concall is scheduled on Friday, October 21, 2011, at 12.30 PM IST, dial
in numbers: 022 6629 0301, 022 3065 0122.

DB Corp – largest print media house::Jefferies

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DB Corp – largest print media house
Executive Summary
DB Corp is India’s largest print media house. It is also the most aggressive
player with leadership in the Hindi belt and in Gujarat. It focuses on Tier ii
and III cities, making it a major beneficiary of regional growth. The company
is expanding in Maharashtra this year and has just finished its Jharkhand
expansion. These expansions, in conjunction with slowing ad markets, will
impact profitability in FY12. But from FY13 onwards, as revenues from these
expansions flow in and the ad market improves, we expect profitability to
clock 30% EPS CAGR over FY13 and FY14. We believe while the market has
priced in the near-term negatives, it has not factored in the acceleration
ahead. We initiate with a Buy on the stock with a target price of Rs 260.
An all-India pursuit
DB Corp is India’s largest print media house. DB is the most aggressive player in the print
segment and is now expanding in the Maharashtra market. DB now has a well-diversified
portfolio with presence in 13 states and four languages. The diversified portfolio also
comes with leadership (Top 3) slot in accelerating Hindi belt states along with Gujarat. It
is the leader in MP/Chhattisgarh, Chandigarh and Haryana, No 2 in Gujarat, Rajasthan and
Punjab. It also has a radio business which runs stations in 17 cities. DB’s strategy of
focussing on Tier II and III cities makes it more linked to the regionalization theme. Even
the recent Maharashtra expansion is focused on tier II and III cities first. With a large
footprint in the non-metros and with accelerating growth here, DB will be a significant
beneficiary of the regionalization theme. The leadership position in these markets will help
it convert the revenue growth into earnings and cash flows.
Expansion mode to impact profits
DB Corp’s diversified leadership will help it attain better-than-industry revenue growth
going forward. However, revenue growth will be subdued in FY12 as the current
slowdown deepens and ad spends are curtailed. From FY13 onwards, strong growth
should return as advertisement spend bounces back from its current lows. In FY12,
however, the recent expansion will impact profitability sharply. We expect margins to fall
sharply in FY12 and recover moderately over the next two years. Margins and RoEs will
remain below the current high level as expansion plans continue till FY13 and possibly
FY14. Earnings growth should return from FY13 and we expect earnings to grow at 30%
CAGR over FY13 and FY14. The balance sheet remains strong and cash flows from mature
markets remain strong to finance future expansions. We expect dividend pay-outs to fall
in FY12 as the firm builds cash in preparation for the Phase III of radio auctions.
Valuation
Growth fears have resulted in underperformance for most print stocks, and DB Corp, with
its aggressive expansion plans, has underperformed the most, trading at 16x 12M forward
PE and 14.8x FY13 PE. While the market has factored in the near-term slowdown it has not
given cognizance to the acceleration ahead, in our view. Given the strong growth
prospects as benefits of expansion flow in and the cost impact ends, we believe the stock
is undervalued. Given the high cash generation and future growth we value the firm at an
average of the FY13 PE and DCF-based target value. We initiate with a Buy and a Target
price of Rs 260, implying 31% potential upside to the current market price.
Risks
The main risks to our valuation are 1) slower GDP growth, 2) slowdown in literacy rate
improvement, 3) increase of competition which will impact the profitability of the players,
4) fluctuations in newsprint prices, 5) execution of recent expansions competitive
intensity in these markets and 6) overbidding risks in Phase III radio auctions.

DB Corp: DBCL's Marathi expansion ::Kotak Sec,

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DB Corp (DBCL)
Media
DBCL’s Marathi expansion. We reiterate our BUY rating on DBCL with FY2013E TP of
Rs330 (Rs350 previously) factoring in (1) reduced advertising growth in FY2012E (~13%
in core/legacy markets versus ~18% previously) and (2) substituting Bihar (Hindi) market
expansion for Maharashtra (Marathi). The Marathi expansion is well underway with new
edition launches in three key cities. DBCL is focused on Tier-II/III cities in the market
(excluding Mumbai-Pune metros) given its track record in such markets. We discuss the
Marathi market: in terms of (1) competition and (2) penetration.


Reiterate BUY with FY2013E-based TP of Rs330 led by core/legacy markets
Exhibit 1 presents a breakdown of 1QFY12 financials of DBCL into mature (print, FM Radio) and
emerging businesses; DBCL’s strong positioning and well-diversified presence (Exhibit 2) across 4
regional markets (core/legacy) resulted in robust 11% yoy revenue and 5% yoy EBITDA growth
despite RM pressures. The RM pressures have started to wane with 2-3% correction in domestic
newsprint prices, which will likely support financials in 2HFY12E.
We have fine-tuned our FY2013E TP to Rs330 (Rs350 previously) and FY2012E-13E EPS estimates
to Rs13 (Rs14.2 previously) and Rs15.5 (Rs17.1 previously) largely due to (1) reduced core/legacy
advertising growth in FY2012E (~13% versus ~18% previously) and (2) start-up losses in Marathi
expansion negated by deferment of Bihar expansion. We do not expect Bihar expansion in the
near term given (1) Jharkhand and Maharashtra expansions, (2) competition in MP-Chhattisgarh
markets and (3) FM radio Phase-III (likely to come in by end-FY2012E).
DBCL’s Marathi expansion: A tale of two markets (metros versus Tier-II/III cities)
DBCL’s Maharashtra (Marathi) expansion is well underway with edition launches in Aurangabad,
Nashik and Jalgaon. The Marathi print market in Maharashtra is a tale of two markets: (1) metros
(Mumbai-Pune) and (2) Tier-II/III (rest of Maharashtra). DBCL is focused on the rest of Maharashtra
(RoM) market given (1) its execution track record in Tier-II/III regional markets and (2) dominance
of English print in metro markets. The Marathi print has average penetration (~25%) and limited
fragmentation (based on Herfindahl-Hirschman Index), excluding the Mumbai-Pune metros
(Exhibits 3-7). Lokmat is the only real competition in RoM market, with a large gap over smaller
competition such as Sakal, Punya Nagari and Pudhari (in Kolhapur).
However, emerging competition from Maharashtra Times (Times of India group) remains a threat,
though limited to Pune and Nashik currently. Marathi C&S TV has emerged in the past 10 years
but advertising is yet low (
may be capped by presence of the direct substitute (Exhibit 9). DBCL has already started tapping
into the local advertising in the launch cities; ramping up national advertising would be the key
challenge (and profitability metric) given phased expansion over FY2012E-13E.


The Marathi expansion (contd.)
We discuss key characteristics of the Marathi print market and DBCL’s Marathi expansion
below. As highlighted previously, DBCL is focused on the Tier-II/III cities in the Marathi print
market; DBCL’s has strong execution track record in such markets having established
leadership or strong runners-up position in Rajasthan, Haryana, Gujarat and Punjab markets
previously (Exhibit 2). DBCL’s multi-stage survey positioned Divya Marathi brand as the
independent newspaper in the market (differentiator) given key competitors (Lokmat, Sakal)
had known political affiliations.
�� The Marathi print advertising market is ~Rs9-10 bn/annum overall. However, Mumbai and
Pune cities contribute ~Rs1.5 bn each to the pie, which is not an addressable market for
DBCL. Thus, the addressable (RoM) Marathi print advertising market for DBCL would be
in the region of ~Rs6-7 bn. The RoM market is witnessing 15-20% growth in print
advertising, similar to other regional markets.
�� A majority (~60%) of the advertising spends are driven by local advertisers; DBCL has
a good track record of converting and expanding the scope of local advertising in its
legacy/core markets (3L+ advertisers). Finally, DBCL will likely aim to leverage its
extensive existing network to (1) bring national advertisers on-board and (2) negate
the lack of Mumbai-Pune cities in its footprint.
�� DBCL has avoided high fragmentation markets such as Mumbai, which has also helped
keep check on the cost of expansion. Exhibit 10 presents the circulation of key
competitors Lokmat and Sakal excluding Pune and Mumbai. Exhibit 11 presents the
sensitivity of annual cost of operation at various levels of circulation and all-inclusive cost
of circulation (per-copy). Thus, the breakeven point of DBCL in the market is ~Rs2.2
bn/annum (~1 mn circulation, ~Rs6/copy cost).
�� DBCL does not have to depend entirely on advertising since cover prices in regional
markets are at reasonable levels even in a competitive environment. The circulation
scheme launched by DBCL in the market (Exhibit 12) results in effective realization of
~Rs1.8-2.1 depending on the city/urban or upcountry/rural area.



Reiterate BUY on attractive valuations
The valuations of print media/media stocks recently have been impacted by the slowdown in
advertising spends in FY2012E led by (1) rising interest rate environment and (2) resulting
slowdown in economic growth. Additionally, the prices of domestic newsprint increased
disproportionate to prices of imported newsprint in 2HFY11-1HFY12, which impacted
regional players somewhat given their newsprint mix (70-80% domestic newsprint).
However, we believe the valuation compression has been overdone given (1) cyclicality of
advertising revenues and (2) recent correction in pricing of domestic newsprint. The street is
attributing trough valuations to trough earnings/growth. We discuss DBCL valuations from
two perspectives below, adjusting for new expansions.
�� DBCL stock trades at 12X FY2013E earnings adjusted for expansion in Jharkhand and
Maharashtra expansions. We believe DBCL’s mature business have the potential to deliver
at least industry-equivalent 15% CAGR in advertising and earnings growth; FY2012E may
be an exceptionally weak year in that respect where revenue and earnings growth may be
constrained by factors discussed above. We highlight DBCL’s strong, well-diversified
presence across its 4 core/legacy markets (Exhibit 2), which have been further
strengthened over time with launch of hyper-local editions.
�� DBCL stock trades at 14X FY2013 consolidated earnings including the startup losses from
Jharkhand and Maharashtra expansion; we highlight that FY2013E may likely see
operating losses peak in these markets. We believe DBCL has the potential to deliver
industry-leading consolidated 20%+ CAGR in advertising and earnings growth, led by
incremental revenue contribution from new expansions and simultaneous reduction in
startup losses (Rs0.8 bn in FY2013E). We again highlight DBCL’s focus and execution
record in Tier-II/III markets, which is playing to its strengths