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DB Corp 3QFY2013 performance highlights and results update

Contributed by Angel Broking

For 3QFY2013, DB Corp (DBCL) reported a robust performance on the earnings front, registering a 27.7% yoy growth to Rs.71cr, higher than our expectations on account of reduction in losses in emerging editions from Rs.14.4cr in 3QFY2012 to Rs.5.6cr in 3QFY2013.

Key highlights for the quarter: For 3QFY2013, DBCL posted an 11.2% yoy growth in its top-line to Rs.439cr, in line with our expectation of Rs.438cr. The company reported a healthy growth of 10.9% yoy in advertising revenue to Rs.318cr aided by festive season and strong growth of 15.7% yoy in circulation revenue to Rs.73cr. Among the other segments, the company’s radio business reported a robust advertising revenue growth of 21.7% yoy to Rs.19cr.

At the operating level, the EBITDA grew by 25.3% yoy to Rs.119cr on account of reduction in losses of emerging editions as well as cost rationalization measures such as improving ad edit ratio, and pagination efficiency, among others. Consequently, the OPM expanded by 306bp yoy to 27.2%. A reduction in losses of the emerging editions from ~Rs.54cr in 9MFY2012 to ~Rs.28cr in 9MFY2013 indicates that the company is on track to meet its guidance of reducing its losses from Rs.77cr in FY2012 to Rs.44cr in FY2013.

Outlook and valuation: At the current market price, DBCL is trading at 15.8x FY2014E consolidated EPS of Rs.14.5. We maintain our Buy view on the stock with a revised target price of Rs.266, based on 18x FY2014E EPS, benchmarking it to our print media sector valuations (which are at ~15% premium to our Sensex target valuation multiple). The downside risks to our estimates include 1) sharp rise in newsprint prices in INR terms, and 2) higher-than-expected losses/increase in the breakeven period of the new launches.