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Jagran Prakashan 2QFY2013 performance highlights and results update

Contributed by Angel Broking

For 2QFY2013, Jagran Prakashan (JPL) reported a robust 51.7% yoy growth in net profit to Rs.69cr aided by tax benefit due to accumulated losses at Nai Dunia. On the operating front, JPL posted a 162bp yoy contraction in its OPM to 24.3% primarily on account of 146bp yoy increase in staff cost (partly due to salary increment in the quarter).

Sluggish top-line growth: For 2QFY2013, JPL reported a sluggish top-line growth of 5.5% yoy to Rs.322cr as slowdown in GDP growth continues to affect advertising revenue growth. The company reported ad revenue growth of 3.6% yoy to Rs.220cr and circulation revenue growth of 8.9% yoy to Rs.67cr. The circulation revenue growth is due to increase in cover prices in selective markets. During the quarter, the companyRs.s non-publishing businesses comprising event, outdoor and digital businesses grew by 17.1% yoy to Rs.29cr.

Outlook and valuation: At the current market price, JPL is trading at 13.8x FY2014E consolidated EPS of Rs.7.3. We maintain our Buy view on the stock with a revised target price of Rs.117, based on 16x FY2014E EPS, valuing it at 10% premium to our Sensex target valuation multiple. Downside risks to our estimates include 1) sharp rise in newsprint prices, 2) higher-than-expected losses/increase in the turnaround period for Nai Dunia/ Mid-day.