DB Corp - 2QFY2013 Result Update - Angel Broking

For 2QFY2013, DB Corp (DBCL) reported a moderate performance on the earnings front, registering a 9.3% yoy growth to Rs.44cr. However, the reported profit grew by 20.8% yoy to Rs.49cr on account of forex gain of Rs.4.6cr.

Key highlights for the quarter:

For 2QFY2013, DBCL reported a weak top-line growth of 7.8% yoy to Rs.378cr on account of a sluggish advertising revenue growth of 2.8% yoy to Rs.283cr. However, circulation revenue grew by a healthy 16.0% yoy to Rs.70cr. Among the other segments, the company's radio business reported a robust advertising revenue growth of 20.3% yoy to Rs.15cr. At the operating level, the EBITDA grew by 23.9% yoy to Rs.86cr on account of cost rationalization measures such as improving ad edit ratio, and pagination efficiency, among others. However, after adjusting for a forex gain of Rs.4.6cr, the EBITDA grew by 17.2% yoy to Rs.81cr. Consequently, the OPM expanded by 174bp yoy to 21.5%. Although, the company's mature editions have OPM of 29.8%, losses in emerging editions led to a margin erosion of the overall print business. A reduction in losses of the emerging editions from Rs.23cr in 2QFY2012 to Rs.10cr in 2QFY2013 indicates that the company is on track to meet its guidance of reducing its losses from Rs.77cr in FY2012 to Rs.44cr in FY2013.

Outlook and valuation: At the current market price, DBCL is trading at 15.4x FY2014E consolidated EPS of Rs.14.4. We maintain our Buy view on the stock with a revised target price of Rs.259, based on 18x FY2014E EPS. The downside risks to our estimates include 1) sharp rise in newsprint prices in INR terms, and 2) higher-thanexpected losses/increase in the breakeven period of the new launches.

Source : Equity Bulls

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