>JAGRAN PRAKASHAN: Nai Dunia acquisition

Strong ad revenue growth


Jagran Prakashan posted the best ad revenue growth in the print sector with a strong 8% growth which helped the company post 4.2% YoY growth in topline. Operating profit was down by mere 4% on the back of marginal increase in employee expenses and mere 14.7% increase in RM cost as the company put use of imported newsprint and reduced pagination. Strong traction in Nai Dunia and Mid Day will help the company post better than industry numbers. Maintain BUY.
 
Q1FY13 results broadly in-line: Jagran Prakashan posted 4.2% topline growth in Q1FY13 to Rs3175mn on the back of strong 8% advertising growth. Circulation growth was at 10%. Operating profit was down 3.9% on the back of 210bps margin compression on the back of higher RM cost. PAT was high by 12% as the company did not pay any tax during the quarter due to accumulated loss on the back of Nai Dunia acquisition.
 
Strong ad revenue growth: The company posted strong 8% YoY ad revenue growth which was the highest in the industry compared to competitors such as HT Media and DB Corp which posted -3% and 1% growth respectively. Sectors such as FMCG and entertainment have
grown while white goods, auto and education have shown a decline. The share of national ads have declined from 43% to 40%, though they have grown compared to the industry which has seen a steep decline in national advertisements. Flanking papers like I-next and City plus
contributed 1.5% of this growth. Their local billing grew by 69% and 48% respectively. The management remained confident that it will grow more than 8% for FY13.



Nai Dunia losses to reduce: The company is gong to merge Nai Dunia operations with itself which would help save ~Rs750mn as tax benefits. During the quarter it was able to garner 27% incremental revenue from national markets while newsprint cost fell by 12% which helped it reduce PAT losses to Rs15mn. For the full year the company has guided losses of Rs100mn against Rs250mn in FY12.

Mid-Day business on track: Mid-Day has shown 8% growth in revenues on the back of strong traction in Inquilab and Gujarati Mid-Day. Readership too has grown by 18% which would incrementally benefit in advertising revenues going forward. Losses have also been under control for the company.
 
Estimates lowered; Maintain BUY: We have cut our FY13/FY14 estimates on back of lower advertising revenues coupled with lower margins. FY13E PAT is higher on back of tax benefits. The stock is currently trading at 10.2x and 11.5x FY13E and FY14E respectively. We value the company at 14x FY14E with our target price of Rs107 and maintain BUY rating on the
stock.


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