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Jagran Prakashan 3QFY2014 performance highlights and results update

January 31, 2014, Friday, 09:49 GMT | 05:49 EST | 15:19 IST | 17:49 SGT
Contributed by Angel Broking

For 3QFY2014, Jagran Prakashan (JPL)’s top-line performance was better than our estimates, growing by 25.1% yoy to Rs.427cr (our estimate was of Rs.407cr). On the operating front, the EBITDA was in-line with our estimates, growing by 29.9% yoy to Rs.109cr. The OPM expanded by 94bp yoy to 25.5%. However, profit grew by only 4.1% yoy to Rs.69cr as the corresponding previous year period’s profit number was aided by a tax benefit (on account of accumulated losses in Nai Dunia), thus resulting in a higher base for 3QFY2014.
Ad revenue up 14.7% yoy & circulation revenue up 13.4% yoy: The company’s advertising revenue for the quarter is up 14.7% yoy to Rs.300cr on like to like (LTL) basis, primarily driven by increase in yields. Circulation revenue is up by 13.4% yoy to Rs.86cr on LTL basis due to combination of increase in cover price and volume growth. Consequently, the standalone top-line grew by 12.7% yoy on LTL basis to Rs.427cr.
Robust operating performance: JPL’s flagship daily, Dainik Jagran’s margin expanded by 75bp yoy to 32.7%. Further, the company reported an operating profit of Rs.1cr in 3QFY2014 compared to an EBITDA loss of Rs.5cr in 3QFY2013 in other publications. Mid-Day is likely to breakeven by the end of FY2014. However, Nai Dunia is still in the investment phase and expected to make an operating loss of Rs.13cr in FY2014.
Outlook and valuation: The stock is currently trading at 11.0x FY2015E consolidated EPS of Rs.8.0 (more than 40% discount to its closest print media peer, DB Corp). However, considering the expected improvement in advertising revenue and operating margin, we foresee JPL gradually narrowing this gap. Hence, we assign a target multiple of 14x FY2015E EPS, (which is at a 20% discount to DB Corp’s target multiple) and maintain our Buy rating on the stock with a target price of Rs.114.