Sunday, May 30, 2010

>DB CORP LIMITED: Better-than-expected numbers…

On a consolidated basis, DB Corp reported its Q4FY10 results. The results were above our expectations. The topline stood at Rs 257.2 crore (I-direct estimate of Rs 248.5 crore), growing 13.3% YoY on the back of higher ad revenues. EBITDA for the quarter grew 44.9% YoY to Rs 69.6 crore. Lower newsprint prices and cost rationalisation measures adopted by the company led to an improvement of 589 bps in the EBITDA margin, which stood at 27.0%. The company reported a PAT of Rs 36.7 crore as compared to Rs 23.5 crore in Q4FY10.

Highlights for the quarter
DB Corp reported YoY ad revenue growth of 10.8% at Rs 185.1 crore. The ad revenue was led primarily by higher volume growth and re-pricing of old clients. Circulation grew 4.2% YoY to Rs 52.7 crore. The EBITDA margin improved YoY on the back of lower raw material cost that was down 8.5% YoY, while QoQ it declined due to higher selling and administrative expenses. Revenue from the radio business grew from Rs 8.0 crore to Rs 10.3 crore in Q4FY10. The radio business broke even during Q4FY10.

Merger of radio business
The company has demerged the radio business from its subsidiary Synergy Media Entertainment Ltd (SMEL) and merged it into the parent company.

At the CMP of Rs 240, the stock is trading at 20.0x FY11E EPS of Rs 12 and 16.8x FY12E EPS of Rs 14.3. Given the good advertisement growth and break even in the radio business, we are confident about the company’s performance. We have valued the stock at 18x FY12 EPS to
arrive at a target price of Rs 258. This implies an upside of 7.4%. We are maintaining our rating on the stock as ADD.

To read the full report: DB CORP