DB Corp - 4QFY2012 Result Update - Angel Broking

DB Corp. (DBCL) reported weak performance on the earnings front, primarily due to sharp fall in operating margins despite moderate performance on the top-line front. Operating margins fell rather steeply during the quarter on account of pre-operative expenses for the new edition launched in Sholapur, operating losses on recent editions launched in Maharashtra and Jharkhand and impact of rupee depreciation on newsprint costs. Consequently, company's earning remained flat on a yoy basis. We maintain our Buy recommendation on the stock.

Key highlights for the quarter: For 4QFY2012, the company's top line grew by 13.6% yoy to Rs.361cr aided by moderate 5.4% yoy growth in ad revenue to Rs.263cr and healthy 16.2% yoy growth in circulation revenues on account of new launches and selective increase in cover prices. Operating margin fell by 407bp yoy (472bp qoq) on account of pre-operative expense on account of Sholapur launch and operating losses on the new editions launched in Maharashtra and Jharkhand. Radio business turned PAT positive and registered EBIDTA of Rs.5.2cr during the year. The company reported flat yoy growth in adjusted profit to Rs.45cr due to aggressive launches during the year.

Outlook and valuation: At the CMP, DBCL is trading at 12.6x FY2014E consolidated EPS of Rs.16.1. We maintain our Buy view on the stock with a revised target price of Rs.269, based on 17x FY2014E EPS, benchmarking it to our print media sector valuations (which are at ~15% premium to our sensex targetvaluation multiple). 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.

Source : Equity Bulls

Keywords