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Jagran Prakashan Ltd.
likely strong 2H; Retain Buy
Inline 2Q; Retain Buy
Post 2Q results we tweak our FY12/13 estimates to factor strong growth in ad
revenues, partly offset by higher newsprint costs. Retain Buy with a PO of Rs160.
While 2Q ad growth was marginally lower than expected, strong ad growth in 3Q
driven by commencement of festive season should help achieve 19% yoy ad
growth for FY11E. We forecast 20% EPS CAGR over FY11-13.
2Q revs: Ad growth marginally lower than expected
Ad growth during the quarter grew by 13% yoy vs. 14% (BofAMLe) and was
impacted by floods in its regions (Uttar Pradesh), cancellation of advertisement in
the last two weeks of September due to uncertainty caused by verdict on Ayodhya
and shifting of festive season to 3Q this year. Management commented that much
of the growth was driven by yield improvement. With festive season to commence
from 3Q, we expect 2H FY11 to grow at faster 23% yoy vs. 15% in 1H FY11.
Modest circulation growth; margins maintained
Circulation revenues grew by 1% yoy, driven by 7% growth in copies, set off by
cut in cover price in a few regions such as Jharkhand. EBITDA margin for the
quarter stood at 32.8% vs. 32.4 %( BofAMLe).
Forecast 20% EPS CAGR
Management highlighted that it has received court approval for merger with Mid
day and plans to expand Inquilab (Urdu newspaper) - to the northern region. Our
estimates don’t factor financials from Mid-day. For Jagran we forecast 20% EPS
CAGR over FY11-13 driven by strong growth in advertisement revenues and
~300bps margin expansion over next two years.
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