Jagran Prakashan - Worst is behind - Centrum

Jagran Prakashan posted its worst ad revenue growth in a decade (though best among listed peers) with 3.6%YoY growth on the back of 2-3% decline in yields. 8.8% circulation growth helped the company achieve 5.5% topline growth. Operating profit was down by mere 1.1% on the back of marginal increase in employee expenses and mere 3.1% increase in RM cost as the company used more domestic newsprint, reduced pagination levels and lowered wastages. Rs70mn forex gain and Rs200mn tax benefit helped the company post 52% YoY growth in profitability. Maintain BUY.

- Q2FY13 results broadly in-line: Jagran Prakashan posted 5.5% topline growth in Q2FY13 to Rs3221mn on 3.6% growth in advertising. Circulation growth was at 8.8%. Operating profit was down 1.1% on the back of 162bps margin compression due to higher employee and admin cost. PAT was higher by 52% as the company did not pay any tax during the quarter due to accumulated losses following Nai Dunia acquisition. Forex gain was at Rs70mn during the quarter due to appreciating Rupee.

- Worst ad growth in a decade: The company posted its worst ad growth in a decade at 3.6% YoY which was the highest in the industry compared to competitors such as HT Media and DB Corp which posted --1% and 3% growth respectively. The impact of delay in festival season was Rs100mn while yields continued to be under pressure and were down by 2-3% during the quarter. The share of national ads continued to be at 40%, similar to the last quarter. Flanking papers like I-next and City Plus contributed to growth with local billing growing by 38% and 33% respectively. We have modelled 8% YoY ad growth for FY13. Circulation revenues were up by 8.8% on the back an increase of 3% in cover price and 5% in circulations.

- Acquisations post strong results: Nai Dunia posted 6.5% YoY growth in local ads against 9% YoY growth in Q1FY13 while national ads grew by 24% in H1FY13. Cash loss during the quarter was Rs30-40mn and for the full year the company has guided losses of Rs100mn against Rs250mn in FY12. For Mid-Day advertising growth was 3% and operating revenue was up by 5.6% following circulation revenues growth in H1FY13. Cash loss was at Rs30mn for H1FY13 and the management expects to break even in the next one year.

- Maintain BUY: The stock is currently trading at 11.7x and 13.2x FY13E and FY14E respectively. We value the company at 15x FY14E with our target price of Rs114 and maintain BUY rating on the stock. We believe the current ad slowdown has bottomed out and Jagran Prakashan is the best placed among peers to gain advantage from this. Turnaround in the new acquisition would further provide upside from FY14.

Source : Equity Bulls

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