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Jagran Prakashan Ltd.
Neutral
JAGP.BO, JAGP IN
1Q FY12: Tepid ad revenue growth and disappointing
margins; cut PT to Rs135, maintain Neutral
Ad growth guidance cut: JAGP reported ad growth of 7.7% YoY in 1Q vs.
19.7% growth in 4Q. Tepid ad growth was on account of poor volumes
from national advertisers, a slowdown in the education sector, and JAGP’s
decision to hold onto ad rates despite discounts offered by competitors.
Management cut FY12 ad growth guidance to 14%-15% from 17%-18%
announced in 4Q. Advertising revenues are expected to pick up towards 2H
FY12, driven by UP state elections slated for 4Q FY12.
Synergies from Mid Day to ramp up over the year: Integration of Mid
Day is on track and Mid Day’s systems are being migrated to JAGP.
Management sees upsides to margins and ramp up of Mid Day revenues
over the course of the year as the integration process is completed. We have
factored Mid Day into our estimates – we expect Mid Day to contribute 8%
to FY12E consolidated revenues and 4% to FY12E consolidated earnings.
Extent of newsprint cost increase surprising: Newsprint costs increased
by 30% YoY in 1Q, 8% on account of increase in circulation, and the
remainder due to pricing. We are surprised by the extent of the price rise,
which greater than that of peers. Management indicated that the sharp price
increase was due to higher composition of imported newsprint (priced at a
premium) given the shortage of domestic newsprint. Going forward,
newsprint costs should normalize as the proportion of imports is reduced.
1Q FY12 results summary: 1Q revenues increased 12% YoY driven by ad
revenues (+7.7% YoY), circulation revenues (+5.2% YoY), and event/
outdoor revenues (+80.3% YoY). EBITDA margins declined 650bp to
27.5% YoY on account of higher newsprint costs. Net profit declined 11%
YoY to Rs497MM.
Reduce estimates and price target: We cut our FY12/FY13 EPS estimates
by 3%/10% on account of slower-than-expected ad growth and higher
newsprint costs. We remain Neutral with a reduced Mar-12 PT of Rs135
(down from Rs140 earlier), based on 18x FY13E P/E.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Jagran Prakashan Ltd.
Neutral
JAGP.BO, JAGP IN
1Q FY12: Tepid ad revenue growth and disappointing
margins; cut PT to Rs135, maintain Neutral
Ad growth guidance cut: JAGP reported ad growth of 7.7% YoY in 1Q vs.
19.7% growth in 4Q. Tepid ad growth was on account of poor volumes
from national advertisers, a slowdown in the education sector, and JAGP’s
decision to hold onto ad rates despite discounts offered by competitors.
Management cut FY12 ad growth guidance to 14%-15% from 17%-18%
announced in 4Q. Advertising revenues are expected to pick up towards 2H
FY12, driven by UP state elections slated for 4Q FY12.
Synergies from Mid Day to ramp up over the year: Integration of Mid
Day is on track and Mid Day’s systems are being migrated to JAGP.
Management sees upsides to margins and ramp up of Mid Day revenues
over the course of the year as the integration process is completed. We have
factored Mid Day into our estimates – we expect Mid Day to contribute 8%
to FY12E consolidated revenues and 4% to FY12E consolidated earnings.
Extent of newsprint cost increase surprising: Newsprint costs increased
by 30% YoY in 1Q, 8% on account of increase in circulation, and the
remainder due to pricing. We are surprised by the extent of the price rise,
which greater than that of peers. Management indicated that the sharp price
increase was due to higher composition of imported newsprint (priced at a
premium) given the shortage of domestic newsprint. Going forward,
newsprint costs should normalize as the proportion of imports is reduced.
1Q FY12 results summary: 1Q revenues increased 12% YoY driven by ad
revenues (+7.7% YoY), circulation revenues (+5.2% YoY), and event/
outdoor revenues (+80.3% YoY). EBITDA margins declined 650bp to
27.5% YoY on account of higher newsprint costs. Net profit declined 11%
YoY to Rs497MM.
Reduce estimates and price target: We cut our FY12/FY13 EPS estimates
by 3%/10% on account of slower-than-expected ad growth and higher
newsprint costs. We remain Neutral with a reduced Mar-12 PT of Rs135
(down from Rs140 earlier), based on 18x FY13E P/E.
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