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Jagran Prakashan: Advertising boosts top line - Views on News from Equitymaster

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Jagran Prakashan: Advertising boosts top line
Jan 31, 2011

Jagran Prakashan has announced its 3QFY11 results. The company has reported a 26.1% YoY and 32.5% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Top line increases by 26.1% YoY during the quarter. For the 9 months period, the revenues were up 18.0% YoY.
  • EBITDA margins were up by 2.6% YoY. For the 9 months period, the margins were up by 1.5% YoY.
  • Other income declined by 20.5% during the quarter. For the 9 months period, the decline was 36.1% YoY.
  • Net profit margins increased by 0.9% YoY during the quarter. For the 9 months period, the net profit margins declined marginally by 0.1% YoY.


Standalone financial snapshot
(Rsm) 3QFY10 3QFY11 Change 9mFY10 9mFY11 Change
Net sales 2,269 2,860 26.1% 7,056 8,327 18.0%
Expenditure 1,616 1,963 21.4% 4,866 5,619 15.5%
Operating profit (EBDITA)    653    897 37.5% 2,190 2,708 23.6%
EBDITA margin (%) 28.8% 31.4%   31.0% 32.5%  
Other income   70   55 -20.5%    277    177 -36.1%
Interest   13   21 55.5%   42   47 12.8%
Depreciation    119    146 22.9%    373    404 8.4%
Profit before tax    590    786 33.2% 2,052 2,433 18.6%
Profit before tax margin (%) 26.0% 27.5%   29.1% 29.2%  
Extraordinary inc/(exp) -   -     -   -    
Tax    193    259 34.6%    657    796 21.1%
Profit after tax/(loss)    397    526 32.5% 1,395 1,637 17.4%
Net profit margin (%) 17.5% 18.4%   19.8% 19.7%  
No. of shares (m)         301  
Diluted earnings per share (Rs)*          6.7  
Price to earnings ratio (x)*           17.5  
* trailing 12 months

What has driven performance in 3QFY11?
  • Jagran Prakashan posted a top line growth of 26.1% YoY during 3QFY11 on the back of robust growth in advertising revenues and circulation revenues of 31.3% YoY and 7.2% YoY respectively. The company’s Event, Outdoor and digital businesses recorded a growth of 23.6% YoY for the quarter. The average issue readership (AIR) for all the publication brands of the group came at 17.7 m according to Q3 IRS. Its flagship Dainik Jagran registered a 0.5 m increase versus 2QFY11 in total readership.

  • The company’s operating profits increased by 37.5% YoY during the quarter, with operating margins at 31.4%, up 2.6% YoY. The margins increased as the overall operating expenses declined to 68.6% of the sales during the quarter (71.2% of sales during 3QFY10). The 0.5% YoY increase in raw material costs (as a % of sales) was more than offset by 3.1% YoY decline in employee costs and other expenses.

  • Net profits registered a growth of 32.5% YoY for the quarter. However, the overall net profit and margins declined sequentially, down 5.1% QoQ and 1.6% QoQ respectively. This was due to full impact of newsprint prices which are expected to remain stable at least for the next one year.

    Cost break-up
    (Rsm) 3QFY10 3QFY11 Change 9mFY10 9mFY11 Change
    Raw material    674    863 28.2% 2,058 2,421 17.6%
    as a % of sales 29.7% 30.2%   29.2% 29.1%  
    Staff costs    304    363 19.5%    893 1,064 19.2%
    as a % of sales 13.4% 12.7%   12.7% 12.8%  
    Other expenditure    639    736 15.2% 1,915 2,134 11.5%
    as a % of sales 28.2% 25.7%   27.1% 25.6%  
    Total expenditure 1,616 1,963 21.4% 4,866 5,619 15.5%
    as a % of sales 71.2% 68.6%   69.0% 67.5%  

  • The company has entered into an agreement to acquire Print business of Multimedia Ltd which has already come into effect in Maharashtra, Uttar Pradesh and Uttarakhand. Please note that the pending conclusion of these activities have not been incorporated in the results of this quarter.

What we expect?
At Rs. 120, the stock is trading at 13.3 times our estimated FY 13 earnings (Research pro subscribers please click here. Though rising competition and its adverse impact on pricing and circulation remain a concern, the newsprint costs will stabilize going forward and top line will be boosted due to Cricket World Cup. Besides, the company has been investing in Event, outdoor and digital basis to diversify its assets and broad base growth. It has also got aggressive capex plans for the next year. However, we believe that the stock is just about fairly valued at the current juncture from a 2-3 year perspective.

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