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Jagran Prakashan: Strong quarter - Views on News from Equitymaster
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Jagran Prakashan: Strong quarter
Jan 30, 2008

Performance summary
  • Operating revenues grow by 29% YoY in 3QFY08 on the back of robust growth in advertisement revenues.
  • Operating profits increase 51% YoY led by lower raw material costs.

  • Bottomline grows by 46% YoY aided by higher operating margins and lower interest costs.

  • For 9mFY08, topline and bottomline grow by 29% YoY and 42% YoY respectively.

(Rs m) 3QFY07 3QFY08 Change 9mFY07 9mFY08 Change
Net Sales 1,546 1,990 28.8% 4,345 5,596 28.8%
Expenditure 1,258 1,558 23.8% 3,421 4,258 24.5%
Operating profit 288 433 50.5% 925 1,338 44.7%
Operating profit margin (%) 18.6% 21.7%   21.3% 23.9%  
Other income 59 56 -4.1% 182 182 -0.1%
Depreciation 58 89 52.9% 162 242 49.2%
Interest 16 14 -12.3% 53 49 -8.7%
Profit before tax 272 386 41.9% 891 1,229 37.9%
Prior period adjustment 3 (0) -107.1% 20 (0) -100.2%
Tax 92 127 38.0% 290 403 38.7%
Profit after tax 177 259 46.3% 582 827 42.1%
Net profit margin (%) 11.5% 13.0%   13.4% 14.8%  
No of shares (m) 301.0 301.0   301.0 301.0  
Diluted earnings per share (Rs)*         3.3  
Price to earnings ratio (x)*         38.9  
* 12 month trailing earnings

What has driven performance in 3QFY08?
  • JPL witnessed a topline growth of 29% YoY for 3QFY08. Advertising and circulation revenues registered a robust growth of 29% YoY and 11% YoY respectively. Increase in total space (even higher colour space) and higher ad rates led to the increase in advertisement revenue. The total space sold was higher by 3% YoY, while colour space was higher by 14% YoY. Increase in circulation revenue was mainly driven by increase in circulation of Dainik Jagran. i-next was expanded to other markets viz. Varanasi, Allahabad and Agra during the current quarter. City Plus, another newspaper brand was further launched in two more locations of New Delhi. The company now has 7 editions of I-next and 9 of City Plus. Advertisement revenue contributed 67% to the topline in 3QFY08, while circulation formed 25%.

  • J9, a dedicated arm of JPL pursued new initiatives in mobile and web space and launched home shopping. It also has plans to add a few more services such as classified vertical in web space in near future. Though it is currently very small, the management expects it to contribute significantly going forward. Out of Home Advertising (OOH) and Event Management activity continued to scale up their operations. While event management is in profits, outdoor suffered a loss of Rs 12.5 m in 3QFY08. However, management expects it to get profitable in the coming quarter, as it has started the business in new regions. A Joint venture Agreement with Television Eighteen was signed to launch business newspaper in Hindi and other regional languages.

  • Operating margins improved by 3.1% YoY in 3QFY08. Employee cost and other expenses increased as a % of sales. Other expenses were higher on account of direct expenses of its new segments (outdoor, event and sms). Raw material prices however reduced from 41% as a % of sales in 3QFY07 to 36% in the current quarter inspite of imported newsprint prices increasing by 7% YoY in the quarter, while that of domestic went up by 3% YoY. Higher sale of colour space (which command higher prices) and higher ad rates aided the margin growth.

  • The bottomline grew by 46% YoY in 3QFY08. Higher operating income and lower interest cost aided the growth. Even the lower tax rate (32.9%) helped the same. However, depreciation was up 53% YoY on account of new capacities.

    What to expect?
    At Rs 130, the stock is trading at a price to earnings multiple of 20 times our estimated FY10 earnings. The company continues to benefit from its strong reach. Also the sector fundamentals are aiding the growth. With its new ventures also performing well, the company is well positioned. The company has also lined up capex plans to fund its growth activities. However, the management expects the newsprint prices to go up. Also, at the current price, the valuations appear stretch.

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