Jagran Prakashan - Q4FY13 Resul Update - SPA Securities

Jagran Prakashan Ltd. (JPL) registered numbers broadly in line with our expectations. The standalone income, adjusted for Nai Dunia's contribution (which was merged with the company in FY13), registered flattish growth in Q4FY13 largely impacted by dull macro-economic environment. EBIDTA margin declined by 173bps YoY to 19.50% on the back of one time provisioning in OOH division of ~INR 140mn. Going ahead, we expect company's ad-revenue growth and margins to improve with expected improvement in economic environment. We are positive on the company's medium to long term growth prospects on the back of secular shift of ad-revenues towards regional media. We maintain our BUY recommendation on the stock with revised 2 years target price of INR 160, rolling our DCF valuation over FY15 estimates.

Flattish growth in topline

JPL registered flattish revenue growth in Q4FY13, weighed by sluggish macro-economic environment. Ad-revenue remained flattish hampered by decline in yields but supported by increase in volumes. For the full year FY13, company registered standalone revenue growth of 5%. OOH (out of home, 6% of standalone revenues) registered good revenue growth of over 20% YoY in FY13 while event business (3% of standalone) got impacted due to discontinuation of the campaign for UP Govt. on the back of nonpayment of dues. Expected improvement in economic growth, election related spending and recent price hikes taken by the company would aid revenue growth going ahead.

EBIDTA margin on recovery mode

Provisioning to the tune of ~INR 140mn impacted EBIDTA margin of the standalone operations, which came at ~20%. Adjusted for the same, EBIDTA margin expanded by ~250bps YoY aided by softening in RM cost in Q4FY13. Consolidated EBIDTA margin declined by 402bps to 19.35% in FY13 on the back of the merger of loss making Nai Dunia in the last fiscal. EBDITA margin is expected to recover with improvement in ad-revenue growth, lower inflation in RM cost and reducing losses in other subsidiaries.

Subsidiaries performance

Mid Day registered flattish revenue of INR 1.14bn in FY13. Shrinking ad-revenue market of Mumbai impacted the revenue growth of Mid Day English (~85% of Mid Day). However, Mid Day's other brands Mid Day Gujarati and Inquilab continue to grow at faster pace with increasing circulation and ad-revenues. Nai Dunia, now merged with JPL, registered good traction in national ad-revenues of ~25% in FY13, boosted by vast network of JPL. National ad-revenue share in Nai Dunia increased to ~27% from ~14% at the time of its acquisition. Management plans to establish Nai Dunia as a strong No. 2 player in MPCG market by 2015.

Buyback or higher interim dividend on anvil

Company reduced its dividend from INR 3.50 in FY12 to INR 2 in FY13 as its mulling the option of buying back shares. Board will take a call on whether to buy-back shares or distribute interim dividends that would best suit the shareholders interest in their forthcoming meeting.

Outlook & Valuation

Although FY13 revenue growth was impacted by sluggish macroeconomic environment, expected improvement in GDP growth rate and managements efforts to aggressively grow revenue from Nai Dunia and Mid Day would aid overall revenue growth in FY14. Higher growth in revenue would also result in EBIDTA margin expansion. JPL being the largest print media company with strong regional presence would gain significantly with increasing thrust of advertisers towards Tier II/III towns in medium to long term. We continue to recommend BUY on the stock with revised 2 years target price of INR 160 (after discounting for FY15E estimates), based on DCF methodology.

Source : Equity Bulls

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