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Jagran Prakashan 3QFY2013 performance highlights and results update

Contributed by Angel Broking

For 3QFY2013, Jagran Prakashan (JPL) reported a robust 59.5% yoy growth in net profit to Rs.66cr aided by tax benefit (due to accumulated losses at Nai Dunia). JPL’s gross margin expanded by 129bp yoy to 65.5% as newsprint prices stabilized and Indian currency fluctuation minimized. However, the OPM came in flat yoy at 24.6% due to forex loss of Rs.5.5cr.

Moderate top-line growth: For 3QFY2013, JPL reported a moderate top-line growth of 7.8% yoy to Rs.342cr, in-line with our expectation of Rs.344cr. In spite of the festive season, the company posted a modest 7.1% yoy growth in its advertising revenue to Rs.239cr (due to high base effect). The increase in circulation and 5% hike in cover price led to 12.2% yoy growth in subscription revenue to Rs.70cr. During the quarter, the company’s non-publishing businesses comprising event, outdoor and digital media grew by 6.6% yoy to Rs.33cr.

Outlook and valuation: At the current market price, JPL is trading at 14.5x FY2014E consolidated EPS of Rs.7.3. We maintain our Buy view on the stock with a revised target price of Rs.125, based on 17x 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 on account of increase in turnaround period for Nai Dunia/ Mid-day.