Jagran Prakashan - Q2FY13 results – revenue in-line but EBITDA disappoints - PhillipCapital

Jagran Prakashan's (Jagran) Q2FY13 standalone results were in-line with revenue estimates, but disappointed on the EBITDA front. Below are key takeaways from the results and the conference call:

Revenue growth boosted by increased circulation income: Revenue stood at Rs 3.2bn, growing 6% YoY and 1% QoQ. Ad revenue stood at Rs 2.2bn, increasing 4% YoY but flat QoQ. The management mentioned that the growth in ad revenue for the company was the lowest in the past decade and believes that the same has bottomed out. Additionally, the company also said that the festive season has entirely shifted to Q3, as opposed to last year, when a portion of festive spends got captured in Q2. The company cautioned on H2FY13 and mentioned that base of ad revenue growth (of H2FY12) is 13%, but still believes that it would grow YoY. October ad revenue growth was 6 adjusting for Deepawali's impact in the previous year's numbers. Circulation revenue recorded a strong growth of 9% YoY and 4% QoQ to Rs 666mn; 3% of this increase came due to higher cover prices. Management mentioned that cover price increases will continue to translate to increased circulation revenue. Additionally, the company also commented that further cover price increases are possible and will be affected if the economic environment remains depressed.

EBITDA below estimates due to provisions: EBITDA at Rs 782mn declined by 1% QoQ and YoY each. EBITDA margin stood at 24.8% despite a QoQ decline in raw material costs. The company said that EBITDA was impacted by one-off employee provisions of R 50mn. The company mentioned that raw material cost control was achieved by altering the mix of newsprint consumption, reduction in wastage and pagination. Employee cost inflation guidance for FY13 is 8%.

Other businesses perform better than management expectations: The Company mentioned that the Outdoor business improved net realizations by 5% and showed strong revenue growth. For Nai Duniya, the company has continued to increase contribution of national revenue by 20%. The total revenue growth for Nai Duniya was 6.5% during the current quarter and cash losses in H1FY13 for the same are only Rs 35-40mn. Mid-Day too has performed better than expectations as H1FY13 cash losses are Rs 30mn. The company believes that it will end up investing only 30-40% of the previously guided amounts in these businesses.

PAT higher than estimates due to forex gains: Jagran's PAT stood at Rs 694mn, much higher than the previous year's corresponding numbers and QoQ. This was buoyed by forex gains of Rs 71mn. The company continues to pay MAT and is using the accumulated losses of Nai Duniya to offset the parent entity's tax liabilities and is hence not making any tax provisions.

Maintain Recommendation and Price Target: We largely maintain our estimates valuing the company at 14x FY14 earnings with a target price of Rs 120. We maintain our Buy recommendation on the stock considering the relatively cheap valuations and possible pick-up in the advertising cycle.

Source : Equity Bulls

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