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Jagran Prak.: Other income boosts profits

Jan 30, 2014 | Updated on Oct 30, 2019

Jagran Prakashan has announced results for the third quarter of financial year 2013-2014 (3QFY14). The company has reported a 22.5% YoY growth in sales and a mere 4.1% YoY growth in net profits. For 9mFY14, the profits dropped by 15.1% YoY. Here is our analysis of the results.

Performance summary
  • Sales grew by 22.5% YoY during 3QFY14.
  • The operating profit for the company climbed by 19.1% YoY on an absolute basis.
  • Operating (EBITDA) margin declined by 0.7% YoY to 23.9% in 3QFY14.
  • The company reported a whopping growth in other income that grew 163% YoY.
  • Profit before tax for the company increased by 35.1% YoY in 3QFY14 due to healthy other income.
  • Profit after tax increased by 4.1% YoY in 3QFY14. For 9mFY14 though profits were down by 15% YoY.

(Rs m) 3QFY13 3QFY14 Change 9mFY13 9mFY14 Change
Net sales 3,417 4,184 22.5% 9,675 11,691 20.4%
Expenditure 2,578 3,185 23.5% 7,384 8,862 19.7%
Operating profit (EBDITA) 839 1,000 19.1% 2,291 2,830 22.5%
EBDITA margin (%) 24.6% 23.9%   23.7% 24.2%  
Other income 63 164 162.8% 307 299 22.5%
Interest 77 90 16.9% 212 233 6.0%
Depreciation & amortisation 166 184 10.9% 475 624 10.2%
Profit before tax and exceptional items 659 890 35.1% 1,910 2,271 10.3%
Exceptional items - -   - -  
Profit before tax 659 890 35.1% 1,910 2,271 10.3%
Profit before tax margin (%) 19.3% 21.3%   19.6% 17.9%  
Tax 0 204 - 0 522 -
Profit after tax 659 686 4.1% 1,910 1,749 -15.1%
Net profit margin (%) 19.3% 16.4%   19.6% 13.8%  
No. of shares (m)         331.91  
Reported earnings per share (Rs)         5.27  
P/E (x)*         13.4  
*On a trailing 12-months basis, adjusted for extraordinary items

What has driven performance in 3QFY14?
  • The 15% growth in advertisement revenue, consistent improvement in per copy realization and a healthy business growth boosted the profitability for the quarter. However, for 9mFY14, the company witnessed 15% fall in net profits primarily on account of increases expenses.

  • The healthy 22.5% growth in sales during 3QFY14 was by virtue of strong growth in advertisement and circulation revenues. For the current year, the company pegs the ad growth rate in the range of about 12-13%.

  • Growth in advertisement revenue was primarily led by improvement in yields. Moreover, the growth in advertisement revenue has been contributed by both local as well as national markets. While FMCG, real estate, pharma and government drove the growth, automobile, household durables and education remained the major laggards. Also, digital reported a whopping 175% growth in advertisement revenue and is expected to maintain the growth momentum going forward.

  • The per copy realization of almost all publication brands has gone up during 3QFY14. Despite the increased per copy realization, the growth in circulation remains intact. Both the crucial brands, viz; "Nai Dunia" and "Dainik Jagran" recorded growth in circulation of 25% and 6% respectively in the past one year.

  • The expenditure for the company stood higher and spiked by 23.5% YoY during 3QFY14. This is because the average cost of print has gone up on account of increase in prices, depreciation in rupee and higher consumption of imported news print. That said, the company would continue to improve the cost efficiency in all areas and restrict the overall expenses at lower than inflation rates.

  • These increased expenditure on account of higher material costs restricted the operating profit growth. Jagran's operating profit for the quarter improved 19.1% YoY during 3QFY14. However, the pace of growth has remained lower to that of the sales growth. As a result, the operating (EBITDA) margin declined by 0.7% YoY to 23.9% in 3QFY14.

  • The company reported a strong growth of 163% YoY in other income during 3QFY14.

  • The profit before tax for the company increased by 35.1% YoY in 3QFY14 due to healthy other income. The profit after tax increased by 4.1% YoY in 3QFY14. For 9mFY14 though profits were down by 15% YoY.
What to expect?
Jagran Prakashan has delivered satisfactory performance during 9mFY14. Going forward, however, there could be a negative impact of intense competition and the breakeven in 'Nai Dunia' could also take few more quarters.

At the current price of Rs 88, the stock is trading at 13.4 times our estimated FY16 earnings per share. We recommend investors to buy the stock at Rs 75 or lower.

We would like to gently remind you that your allocation to equities should be decided upon after keeping aside some safe cash. Also within your overall exposure to equities please ensure that you broadly follow our suggested asset allocation and that no single stock comprises more than 5% of your portfolio.

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