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DB Corp (DBCL)
Media
Robust 1QFY12 adjusted for new launches. DB Corp reported robust 1QFY12
EBITDA of Rs1 bn (-12% yoy, +26% qoq; marginally ahead of our Rs900 mn estimate)
in light of significant operating losses (Rs173 mn) from new launches (first full quarter
of Jharakhand expansion, start of Maharashtra expansion); 20% yoy advertising growth
in a challenging environment (18% yoy excluding new launches) was the highlight of
1QFY12. Reiterate BUY with revised TP of Rs350 (Rs320 previously; rollover to FY2013E)
led by (1) robust leadership position across legacy markets and (2) expansion into new
markets, with national advertising starting to flow through by 2HFY12E; nonetheless,
we do not assume significant value-addition from new markets yet.
1QFY12 results analysis: Robust performance adjusted for losses in new launches
DB Corp reported robust 1QFY12 EBITDA of Rs1 bn (-12% yoy, +26% qoq), ahead of our
Rs900 mn expectation, led by (1) robust 18% yoy advertising growth in legacy markets and
despite (2) Rs173 mn of operating losses in new markets (Jharkhand and Maharashtra but also
new editions in existing markets such as Gujarat and Punjab).
DBCL reported 1QFY12 advertising revenues at Rs2.7 bn (+20% yoy, +15% qoq), ahead of our
Rs2.6 bn expectation. Besides incremental advertising from new launches, DBCL reported
robust 18% yoy advertising growth from legacy markets.
DBCL also faced similar headwinds of (1) weakness in national advertising and (2) education
advertising in 1QFY12 but (1) significant share of local advertisers (>55%) and (2) pickup in
education advertising in some of its markets (notably Rajasthan and MPCG) in June-2011
helped support financials. The outlook remains challenging for FY2012E.
Reiterate BUY: Advertising cycle a concern but valuations discount even core business
We reiterate our BUY rating on DB Corp with revised TP of Rs350 (Rs320 previously; rollover to
FY2013E) led by (1) robust leadership position across legacy markets (even in the face of acute
competition in home MPCG market) and (2) robust FCF generation (~Rs1.4 bn in FY2011 including
~Rs0.6 bn one-time discretionary capex) despite new launches. We do not believe ~6.5X FY2013E
EV/EBITDA valuation (adjusted for operating losses in new launches) capture the growth and cash
generation potential of even legacy markets. DBCL reported dividend yield of ~1.8% in FY2011
despite large investments in new markets for growth.
We view street’s worries on DBCL’s new market expansion as significantly overblown given the
track record of the management. Nonetheless, we do not assume significant value-addition from
new markets. We had one concern: Simultaneous expansion in two large markets like Bihar and
Maharashtra may have put significant financial and operational burden on the company; these
concerns have been put to rest as DBCL has deferred its Bihar expansion and plans to concentrate
on Marathi/Maharashtra, a more prudent approach, in our view.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
DB Corp (DBCL)
Media
Robust 1QFY12 adjusted for new launches. DB Corp reported robust 1QFY12
EBITDA of Rs1 bn (-12% yoy, +26% qoq; marginally ahead of our Rs900 mn estimate)
in light of significant operating losses (Rs173 mn) from new launches (first full quarter
of Jharakhand expansion, start of Maharashtra expansion); 20% yoy advertising growth
in a challenging environment (18% yoy excluding new launches) was the highlight of
1QFY12. Reiterate BUY with revised TP of Rs350 (Rs320 previously; rollover to FY2013E)
led by (1) robust leadership position across legacy markets and (2) expansion into new
markets, with national advertising starting to flow through by 2HFY12E; nonetheless,
we do not assume significant value-addition from new markets yet.
1QFY12 results analysis: Robust performance adjusted for losses in new launches
DB Corp reported robust 1QFY12 EBITDA of Rs1 bn (-12% yoy, +26% qoq), ahead of our
Rs900 mn expectation, led by (1) robust 18% yoy advertising growth in legacy markets and
despite (2) Rs173 mn of operating losses in new markets (Jharkhand and Maharashtra but also
new editions in existing markets such as Gujarat and Punjab).
DBCL reported 1QFY12 advertising revenues at Rs2.7 bn (+20% yoy, +15% qoq), ahead of our
Rs2.6 bn expectation. Besides incremental advertising from new launches, DBCL reported
robust 18% yoy advertising growth from legacy markets.
DBCL also faced similar headwinds of (1) weakness in national advertising and (2) education
advertising in 1QFY12 but (1) significant share of local advertisers (>55%) and (2) pickup in
education advertising in some of its markets (notably Rajasthan and MPCG) in June-2011
helped support financials. The outlook remains challenging for FY2012E.
Reiterate BUY: Advertising cycle a concern but valuations discount even core business
We reiterate our BUY rating on DB Corp with revised TP of Rs350 (Rs320 previously; rollover to
FY2013E) led by (1) robust leadership position across legacy markets (even in the face of acute
competition in home MPCG market) and (2) robust FCF generation (~Rs1.4 bn in FY2011 including
~Rs0.6 bn one-time discretionary capex) despite new launches. We do not believe ~6.5X FY2013E
EV/EBITDA valuation (adjusted for operating losses in new launches) capture the growth and cash
generation potential of even legacy markets. DBCL reported dividend yield of ~1.8% in FY2011
despite large investments in new markets for growth.
We view street’s worries on DBCL’s new market expansion as significantly overblown given the
track record of the management. Nonetheless, we do not assume significant value-addition from
new markets. We had one concern: Simultaneous expansion in two large markets like Bihar and
Maharashtra may have put significant financial and operational burden on the company; these
concerns have been put to rest as DBCL has deferred its Bihar expansion and plans to concentrate
on Marathi/Maharashtra, a more prudent approach, in our view.
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