>DECCAN CHRONICLE (ANGEL BROKING)

PERFORMANCE HIGHLIGHTS

■ Modest Top-line growth, up 12%: For 1QFY2010, Deccan Chronicle Holdings (DCHL) reported modest 12% yoy growth to Rs216.6cr (Rs193.5cr) on a standalone basis, partially aided by higher Elections spend. Management has indicated that Top-line growth during the quarter was largely driven by rate hikes taken earlier (have started reflecting now), while volumes continue to be under pressure (fell yoy).

■ Lower Interest costs boost Earnings, up 26%: DCHL’s Earnings for the quarter, on a standalone basis, registered a 26.3% yoy jump to Rs77cr (Rs61cr) despite modest Top-line growth and flattish Margins, largely aided by a 44% decline in Interest costs to Rs11.1cr (Rs19.8cr) and 19.4% rise in Other Income to Rs7.1cr (Rs5.9cr). While the Tax rate for the quarter remained flat in yoy terms, Depreciation charges increased by almost 30% yoy on account of higher capex.

■ Operating Margins flat: On the Operating front, DCHL registered a flattish performance with Operating Margins at 48.9% driving 11.9% yoy growth in EBITDA (driven by Top-line growth) to Rs105.9cr (Rs94.7cr). Newsprint costs remained flat (as a % of Net Sales), but increased 11.5% yoy in absolute terms owing to higher Circulation. We believe that full benefits of falling newsprint prices (have declined from peak of US $950 to US $600) has still not kicked in due to higher priced inventory. In terms of other costs, while Staff costs increased by 134bp yoy during the quarter, Other expenditure fell by 117bp yoy. Going ahead, we expect DCHL to benefit significantly from the decline in newsprint costs as full benefits of lower prices and Rupee appreciation kick in. However, stiffer competition in Chennai and initial losses on account of the Bangalore edition and Financial Chronicle are likely to keep the company’s Margin expansion under check.

To see full report: DECCAN CHRONICLE