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Jag. Prak.: Performs better than peers
May 30, 2012

Jagran Prakashan has announced results for fourth quarter of financial year 2011-2012. The company has reported a 9.8% YoY growth in sales and a 1.8% growth in net profits. Here is our analysis of the results.

Performance summary
  • Top line increased by 9.8% YoY during the quarter. For the year it grew by 11.6% YoY.
  • Operating expenses grew by 15.8% YoY during the quarter and by 20.5% YoY during the full year ended March 2012.
  • Operating profits thus fell by 7.7% YoY during the quarter and 8.6% YoY during the year.
  • Operating margins fell by nearly 4% in March quarter.
  • Other income swelled by 233% YoY in 4QFY12 due to a higher amount of foreign exchange gains of Rs 73 m.
  • Interest expenses shot up by 83.2% YoY with debt to equity at 0.9 times in March 2012 as against debt to equity of 0.3 in March 2011.
  • Jagran Prakashan reported almost flat net profit growth of 1.8% YoY during the quarter.
  • The company has declared a dividend of Rs 3.5 per share implying a dividend yield of 4% at current prices.

Standalone financial snapshot
(Rs m) 4QFY11 4QFY12 Change FY11 FY12 Change
Net sales 2,826 3,104 9.8% 11,153 12,444 11.6%
Expenditure 2,112 2,445 15.8% 7,731 9,318 20.5%
Operating profit (EBDITA) 714 659 -7.7% 3,422 3,126 -8.6%
EBDITA margin (%) 25.3% 21.2% 4.0% 30.7% 25.1% 5.6%
Other income 55 183 232.7% 232 254 9.4%
Interest 25 45 83.2% 72 146 102.7%
Depreciation & amortisation 160 181 13.1% 564 657 16.4%
Profit before tax 584 615 5.4% 3,017 2,577 -14.6%
Profit before tax margin (%) 20.7% 19.8%   27.1% 20.7%  
Tax 163 187 14.6% 959 781 -18.6%
Profit after tax 421 428 1.8% 2,058 1,796 -12.7%
Net profit margin (%) 14.9% 13.8%   18.5% 14.4%  
No. of shares (m)         316.27  
Diluted earnings per share (Rs)*         5.7  
P/E (x)         15.1  
(*On a trailing 12-month basis)

What has driven performance in 4QFY12?
  • As opposed to its peers, Jagran Prakashan's advertising revenue grew by a healthy 11.5% YoY during the quarter. This helped the print media company in registering an overall revenue growth of 9.8% YoY.

  • Circulation revenues were up by 12.4% YoY helped by the price increase in cover prices taken by the company recently.

  • Rising newsprint costs which were up by 18% YoY during the year continued to impact the profit margins adversely. This coupled with launch expenses incurred towards Jagran Punjabi resulted in a 7.7% YoY fall in operating profits for the quarter. For the year, this fell by 8.6% YoY.

  • Operating margins shrank by 4% during the quarter to 21.2%. Annual operating margins were higher at 25.1%.

  • Interest expenses shot up by 83.2% YoY during the quarter.

  • Jagran Prakashan reported almost flat net profit growth of 1.8% YoY during the quarter. For the year this was down by 12.7% YoY.

  • Net profit margins though best in the industry stood at 13.8% and 14.4% for the quarter and the year as compared to 14.9% and 18.5% recorded in the respective same periods last year.

    Cost break-up
    (% of sales) 4QFY11 4QFY12 Change FY11 FY12 Change
    Raw materials consumed 911 1,082 18.8% 3,332 4,281 28.5%
    % sales 32.2% 34.9%   29.9% 34.4%  
    Staff cost 365 428 17.2% 1,430 1,603 12.1%
    % sales 12.9% 13.8%   12.8% 12.9%  
    Other expenses 835 935 11.9% 2,970 3,433 15.6%
    % sales 29.6% 30.1%   26.6% 27.6%  
    Total expenditure 2,112 2,445   7,731 9,318  

What to expect?
The year was very challenging for all media companies. However, Jagran managed to post healthy growth in advertising as well as other business interests. The company recently acquired Suvi Infomanagement (Indore) Private Limited which publishes Nai Dunia. With this Jagran will have a stronger presence in the promising states of Madhya Pradesh and Chhatisgarh where Nai Dunia presently is number two.

Higher newsprint costs combined with initial launch expenses incurred towards Punjabi Jagran dented profits of the media company. Newsprint prices are expected to stabilize in the future but falling rupee would make imports of newsprint costlier thereby hurting the bottomline. With no new launches planned in near term, the company wants to focus on consolidating its business in existing markets and segments. At Rs 86, the stock is trading at 13 times our expected FY14 earnings. Keeping in mind the negative outlook for the sector and pressure on profitability for some more time to come, we advise investors to have a cautious view regarding the valuations of the stock.

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