>DB CORP LIMITED: Foray in new territories

DB Corp is one of the leading print media companies in India, publishing in three languages (Hindi, Gujarati and English), in 11 states in India. We expect the company’s circulation revenues to grow on the back of its phased entry into new territories of Bihar, Jharkhand and Jammu. DBCL’s recent ad-rate hike of 14% will also boost its advertisement revenues. We believe that the increasing purchasing power of Tier II and Tier III cities present significant opportunities for advertisers marketers and media players. This is favourable for DBCL as it has a strong presence in these markets. We expect the revenue to grow at a CAGR of 14% over FY10-FY12E and profits at a CAGR of 15% over the same period. We are initiating coverage on DBCL with a ‘BUY’ rating.

■ Entry in new territories to boost circulation revenues: DBCL is entering new territories of Bihar, Jharkhand and Jammu. Although these editions will take 2-3 years to break-even, the sale of these editions would boost the company’s circulation revenues.

■ Growth in regional advertisement: The increasing number of middle and higher income households has made Tier II and Tier III cities attractive markets, thereby resulting in growth in regional advertisement. DBCL is likely to garner a major chunk in regional advertisement pie as most of its editions enjoy leadership positions in these cities.

■ Hike in ad-rates to further boost ad-revenues: With improvement in the economic scenario, there is an overall improvement in the advertisement volumes. Considering this, DBCL has recently taken a 14% hike in its advertisement rate which would further boost DBCL’s ad revenues.

Valuation
At the CMP of Rs 233, DBCL is trading at 20x and 17x its FY11E and FY12E earnings, and 11x and 9x its expected EV/EBIDTA value. We value DBCL at 13x its FY11E EV/EBIDTA to arrive with a 12-month target price of Rs 289, implying a potential upside of 24% from present levels. We initiate coverage with a ‘BUY’ rating.

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