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Research
DB Corp - Results slightly below expectations; loweringestimates; maintain Buy - BRICS
Posted On : 2013-05-21 21:11:44( TIMEZONE : IST )
DB Corp's (DBCL) revenue grew 10.4% yoy to Rs3.98bn, which was marginally below expectation. EBITDA margin improved by 258bps yoy to 23.6%, as losses from emerging editions fell to Rs58mn from Rs185mn in Q4FY12. We have lowered our FY14/15 revenue estimates by 3.6%/3.9% and our EBITDA margin estimates by 86bps/112bps to factor in DBCL's underperformance in Q4FY13. Raising target price to Rs290 (from Rs275), as we roll forward to FY14/15 estimates, while keeping P/E multiple unchanged at 15x. Maintain BUY.
Revenue growth: Revenue grew 10.4% yoy to Rs3.98bn, led by growth of 14.1% yoy in mature editions and 26.7% yoy in radio segment. However, the growth in emerging editions was disappointing at 9% yoy. Print advertising revenue was up 13.1% yoy to Rs2.98bn. Improvement in realisation (to Rs2.66 per copy) and higher circulation resulted in growth of 17.5% yoy in circulation revenue to Rs731mn. We expect the advertising business to return to growth in FY14, partly due to assembly elections in MP and Chhattisgarh and possible general elections.
Margin expands: EBITDA margin expanded by 258bps yoy to 23.6%, due to lower raw material costs and stronger advertising revenue. EBITDA margin of mature editions improved to 30.8% from 29.9% in Q4FY12, while EBITDA losses of emerging editions declined to Rs58mn from Rs185mn. Margin of radio business improved to 37.3% to 35.6%, due to better pricing yield. We estimate DBCL's margins to improve by 654bps over FY13-15, led by recovery in advertising market, reduction in losses from new editions and improvement in radio business.
Valuation: Stock trades at P/E of 14.0x FY14 and 11.2x FY15 EPS. We believe continued margin expansion and improvement in advertisement environment will lead to re-rating of the stock. Maintain Buy, while raising target price to Rs290, in view of DBCL's leadership position in key Hindi states and urban centres, reducing losses, growth opportunities, and traction in radio business.
Tweaking estimates: We have lowered our FY14/15 revenue estimates by 3.6%/3.9% and our EBITDA margin estimates by 86bps/112bps to factor in DBCL's underperformance in Q4FY13. As a result, our FY14/15 earnings estimates are down by 4%/6.1%.
