Neutral on Jagran Prakashan - Motilal Oswal

JAGRAN 3QFY11: Revenue and EBITDA broadly in line; Newsprint prices to stabilize; Competition to intensify; Neutral

Revenue increased 26.1% YoY and 3.3% QoQ to Rs 2.86b (est of Rs2.83b) driven by advertisement revenue growth of 31%.

EBITDA increased 37.5% YoY but declined 1.2% QoQ to Rs897m (est of Rs917m). EBITDA margin stood at 31.4%, up 260bp YoY but down 140bp QoQ.

Advertising revenue increased 31.3% YoY and 0.5% QoQ to Rs1.95b (est of Rs2b). Circulation revenue increased 7.2% YoY.

Other revenues (outdoor business, event management and digital businesses) recorded strong growth of 35% YoY and 21% QoQ to Rs345m (vs est of 286m).

Operating expenses increased 21.4% YoY and 5.5% QoQ to Rs1.96b vs est of Rs1.92b; cost of raw material increased 28.2% YoY and 7.7% QoQ.

Raw material pressure is likely to ease going forward with stabilizing newsprint prices, however competitive intensity is expected to increase further in Bihar/Jharkhand. We expect Jagran to clock EPS CAGR of 15% over FY11E-13E. The stock trades at a P/E of 16.2x FY12 and 14x FY13. Maintain Neutral with a target price of Rs140 (15x FY13E EPS + Rs5 towards dividend).

Source : Equity Bulls

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