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Jagran Prakashan: Tough quarter - Views on News from Equitymaster

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Jagran Prakashan: Tough quarter

Jan 28, 2009

Performance summary
  • Reports a topline growth of meager 4% YoY during 3QFY09 and 11% YoY during 9mFY09.
  • Operating margins decline by 7% YoY during the quarter, while margins are down by 5% YoY during 9mFY09.
  • Net profits decline by 40% YoY and 16% YoY respectively for both the periods under consideration


Standalone financials
(Rs m) 3QFY08 3QFY09 Change 9mFY08 9mFY09 Change
Net Sales 1,990 2,070 4.0% 5,596 6,221 11.2%
Expenditure 1,557 1,769 13.6% 4,258 5,044 18.5%
Operating profit 433 301 -30.6% 1,338 1,177 -12.0%
Operating profit margin (%) 21.8% 14.5% 23.9% 18.9%
Other income 56 45 -20.4% 182 163 -10.7%
Depreciation 89 98 10.4% 242 271 11.7%
Interest 14 18 26.1% 49 39 -19.2%
Profit before tax 386 229 -40.6% 1,229 1,030 -16.2%
Extraordinary item - - - -
Tax 127 75 -41.1% 403 332 -17.6%
Profit after tax 259 155 -40.4% 827 698 -15.5%
Net profit margin (%) 13.0% 7.5% 14.8% 11.2%
No of shares (m) 60.2 301.3 60.2 301.3
Diluted earnings per share (Rs)* 2.8
Price to earnings ratio (x)* 16.3
* 12 month trailing earnings

What has driven performance in 3QFY09?
  • JPL reported a sluggish topline growth of 4% YoY during 3QFY09. The same witnessed at 11% YoY during 9mFY09. Lower ad spends by the corporates on account of economic slowdown affected its performance. Ad revenues saw a 5% YoY growth, while circulation increased by 4% YoY. The national ads were down by 2% to 3% YoY, while local ads saw a growth of 11% YoY. This is lower than 20% growth witnessed earlier. The local ads contribute around 60% to its revenues. The company had taken price hikes in March, September and December last year. However, it has been not able to completely pass it to the customers. I-next and City plus editions are performing as per managementís expectations. OOH saw some de-growth of 2% YoY.

    Cost break-up
    As a % of net sales 3QFY08 3QFY09 9mFY08 9mFY09
    Consumption of raw materials 36.1% 42.5% 36.1% 39.7%
    Employees Cost 12.1% 13.5% 11.8% 12.9%
    Other expenditure 30.1% 29.5% 28.2% 28.5%

  • JPL witnessed a 7% YoY decline in operating margins during the quarter, while margins were down 5% YoY during 9mFY09. Higher newsprint prices and employee costs led to the fall. The newsprint had witnessed an unprecedented rise last year. Exchange fluctuations further added to the woes. The company had taken some hike on the cover prices. The company expects the margins to improve going forward, as the newsprint prices have declined in the range of 15% to 25%.

  • Lower margins coupled with lower other income and higher interest expense led to a 40% YoY decline I the net profits during 3QFY09. For the 9 month period, the profits were down 16% YoY.

What to expect?
At Rs 46, the stock is trading at a multiple of 7.5 times our estimated FY11 earnings. The company continues to be the leading newspaper in the country. It is also witnessing rise in circulation number. The softening of the newsprint prices may benefit the coming from 1QFY10. While the company is more of a local player, the impact of slowdown was less than its peers. However, it was unable to pass the price hikes. Any further price hikes also seems doubtful. While the elections coming up, in near future, some ads may flow in. While the topline is in line with our estimates, the company has underperformed on the margin front. We will soon review our numbers.

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