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UBS Investment Research
Jagran Prakashan
Q1 FY12—a mixed quarter
„ Event: Q1 revenues below and net profit ahead of UBS-e
Q1 FY12 standalone revenues grew 13% YoY to Rs3,046m, 4% below UBS-e of
Rs3,165m due to lower advertising revenues (+8% YoY) as volumes came under
pressure. Jagran expects ad revenues to grow 14-15% in FY12. EBITDA declined
9% YoY to Rs820m (UBS-e Rs823m). The EBITDA margin came in at 26.9%
(UBS-e 26.0%). Jagran maintained FY12 EBITDA margin guidance at 28-29%.
Newsprint price rose to cRs31,000/kg (+9% QoQ) due to higher prices and change
in mix. Net profit declined 11% YoY to Rs497m (UBS-e Rs468m).
„ Impact: maintain earnings estimates
Jagran achieved 22-23% of our FY12 EBITDA and net profit estimates in Q1. We
maintain our FY12 overall revenue growth forecast at 13%, ad revenue growth at
15%, and EBITDA margin at 28.5%. We believe ad revenue growth is likely to be
strong in H2, partly due to election advertising in Uttar Pradesh (UP).
„ Action: maintain positive view on Jagran
Jagran benefits from rapidly growing advertising spending in tier 2 and 3 cities due
to strong economic growth and increasing consumption compared with metros.
Jagran has a strong leadership position in print media in UP—one of the largest
Hindi print media markets with an estimated market size of Rs8bn.
„ Valuation: maintain Buy with price target of Rs145
We derive our price target from our FY13 EPS estimate of Rs8.71 and 16.5x
FY13E PE in line with its historical trading average.
Key takeaways from conference call
Q Jagran management highlighted that growth in advertising revenue was slow
(+8% YoY) as ad volumes came under pressure from the following sectors:
pharma, film entertainment, personal care, telecom and financials. The share
of local advertisers increased to 58% in Q1.
Q Jagran expects ad revenues to grow 14-15% in FY12 due to:
— Extension of education sector advertising into August;
— Finalisation of advertising deals with a few large advertisers at higher
rates (Jagran increased card rates by 15% in April 2011);
— The upcoming festive season;
— Election advertising in UP in H2;
Q Newsprint prices increased to cRs31,000/kg (+9% QoQ) due to higher prices
and change in mix (more international newsprint consumed—33% of the
total due to shortage of domestic newsprint). Newsprint volumes grew 10%
to c28,000 tons. Management expects newsprint prices to remain stable
going forward. The share of domestic newsprint will revert to earlier levels.
Q Jagran management expects EBITDA margins to improve in the next few
quarters and has maintained FY12 EBITDA margin guidance at 28-29%.
Q Mid Day revenues came in at Rs260m and net profit at Rs17.5m. The
company expects Mid Day’s FY12 revenues to grow 8-10% and 15-16%
operating margins.
Q Jagran launched a newspaper daily in Punjabi language, ‘Punjabi Jagran’.
Jagran reported losses of Rs20m related to this launch in Q1. Jagran has an
average daily circulation of 0.135m copies in Punjab and aims to increase it
to 0.15m copies by end-FY12.
Q Jagran plans to incur capital expenditure of Rs1.25-1.3bn in FY12.
Q Jagran Prakashan
Jagran Prakashan is one of the largest Hindi newspaper companies in India. It
also has presence in outdoor advertising, the Internet, magazines, below the line
marketing solutions and mobile value-added services. Its flagship Hindi
newspaper ‘Dainik Jagran' has consistently been the most widely-read
newspaper in India. Dainik Jagran publishes 37 editions and more than 200 subeditions in 11 states, with an average daily readership of 16.1m. In May 2010,
Jagran Prakashan acquired the print business of Mid Day Multimedia in a 7:2
share swap (two Jagran Prakashan shares for every seven Mid Day Multimedia
shares).
Q Statement of Risk
We believe the key risks for Jagran Prakashan are decline in average readership
could impact advertising rates, increase in newsprint costs could impact margins,
intense competition in UP and Bihar.
Q Analyst Certification
Each research analyst primarily responsible for the content of this research
report, in whole or in part, certifies that with respect to each security or issuer
that the analyst covered in this report: (1) all of the views expressed accurately
reflect his or her personal views about those securities or issuers and were
prepared in an independent manner, including with respect to UBS, and (2) no
part of his or her compensation was, is, or will be, directly or indirectly, related
to the specific recommendations or views expressed by that research analyst in
the research report.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
Jagran Prakashan
Q1 FY12—a mixed quarter
„ Event: Q1 revenues below and net profit ahead of UBS-e
Q1 FY12 standalone revenues grew 13% YoY to Rs3,046m, 4% below UBS-e of
Rs3,165m due to lower advertising revenues (+8% YoY) as volumes came under
pressure. Jagran expects ad revenues to grow 14-15% in FY12. EBITDA declined
9% YoY to Rs820m (UBS-e Rs823m). The EBITDA margin came in at 26.9%
(UBS-e 26.0%). Jagran maintained FY12 EBITDA margin guidance at 28-29%.
Newsprint price rose to cRs31,000/kg (+9% QoQ) due to higher prices and change
in mix. Net profit declined 11% YoY to Rs497m (UBS-e Rs468m).
„ Impact: maintain earnings estimates
Jagran achieved 22-23% of our FY12 EBITDA and net profit estimates in Q1. We
maintain our FY12 overall revenue growth forecast at 13%, ad revenue growth at
15%, and EBITDA margin at 28.5%. We believe ad revenue growth is likely to be
strong in H2, partly due to election advertising in Uttar Pradesh (UP).
„ Action: maintain positive view on Jagran
Jagran benefits from rapidly growing advertising spending in tier 2 and 3 cities due
to strong economic growth and increasing consumption compared with metros.
Jagran has a strong leadership position in print media in UP—one of the largest
Hindi print media markets with an estimated market size of Rs8bn.
„ Valuation: maintain Buy with price target of Rs145
We derive our price target from our FY13 EPS estimate of Rs8.71 and 16.5x
FY13E PE in line with its historical trading average.
Key takeaways from conference call
Q Jagran management highlighted that growth in advertising revenue was slow
(+8% YoY) as ad volumes came under pressure from the following sectors:
pharma, film entertainment, personal care, telecom and financials. The share
of local advertisers increased to 58% in Q1.
Q Jagran expects ad revenues to grow 14-15% in FY12 due to:
— Extension of education sector advertising into August;
— Finalisation of advertising deals with a few large advertisers at higher
rates (Jagran increased card rates by 15% in April 2011);
— The upcoming festive season;
— Election advertising in UP in H2;
Q Newsprint prices increased to cRs31,000/kg (+9% QoQ) due to higher prices
and change in mix (more international newsprint consumed—33% of the
total due to shortage of domestic newsprint). Newsprint volumes grew 10%
to c28,000 tons. Management expects newsprint prices to remain stable
going forward. The share of domestic newsprint will revert to earlier levels.
Q Jagran management expects EBITDA margins to improve in the next few
quarters and has maintained FY12 EBITDA margin guidance at 28-29%.
Q Mid Day revenues came in at Rs260m and net profit at Rs17.5m. The
company expects Mid Day’s FY12 revenues to grow 8-10% and 15-16%
operating margins.
Q Jagran launched a newspaper daily in Punjabi language, ‘Punjabi Jagran’.
Jagran reported losses of Rs20m related to this launch in Q1. Jagran has an
average daily circulation of 0.135m copies in Punjab and aims to increase it
to 0.15m copies by end-FY12.
Q Jagran plans to incur capital expenditure of Rs1.25-1.3bn in FY12.
Q Jagran Prakashan
Jagran Prakashan is one of the largest Hindi newspaper companies in India. It
also has presence in outdoor advertising, the Internet, magazines, below the line
marketing solutions and mobile value-added services. Its flagship Hindi
newspaper ‘Dainik Jagran' has consistently been the most widely-read
newspaper in India. Dainik Jagran publishes 37 editions and more than 200 subeditions in 11 states, with an average daily readership of 16.1m. In May 2010,
Jagran Prakashan acquired the print business of Mid Day Multimedia in a 7:2
share swap (two Jagran Prakashan shares for every seven Mid Day Multimedia
shares).
Q Statement of Risk
We believe the key risks for Jagran Prakashan are decline in average readership
could impact advertising rates, increase in newsprint costs could impact margins,
intense competition in UP and Bihar.
Q Analyst Certification
Each research analyst primarily responsible for the content of this research
report, in whole or in part, certifies that with respect to each security or issuer
that the analyst covered in this report: (1) all of the views expressed accurately
reflect his or her personal views about those securities or issuers and were
prepared in an independent manner, including with respect to UBS, and (2) no
part of his or her compensation was, is, or will be, directly or indirectly, related
to the specific recommendations or views expressed by that research analyst in
the research report.
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