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Jagran Prakashan: Slower growth in circulation - Views on News from Equitymaster

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Jagran Prakashan: Slower growth in circulation

Jun 1, 2011

Jagran Prakashan has announced its 4QFY11 results. The company has reported a 19.6% YoY and 15.7% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Top line increased by 19.6% YoY during the quarter. For the full year, revenues were up 18.4% YoY.
  • EBITDA margins declined by 1.5% YoY during the quarter. For FY 11, company has been able to maintain these at 30%.
  • Other income declined by 16.5% during the quarter. A decline of 32% was seen in other income for the full year.
  • Net profit margins decreased by 0.5% YoY during the quarter. For the 9 months period, the net profit margins declined marginally by 0.2% YoY.

Financial performance snapshot
(Rs m) 4QFY10 4QFY11 Change FY10 FY11 Change
Net sales 2,363 2,826 19.6% 9,419 11,153 18.4%
Expenditure 1,730 2,112 22.1% 6,596 7,731 17.2%
Operating profit (EBDITA) 633 714 12.9% 2,823 3,422 21.2%
EBDITA margin (%) 26.8% 25.3%   30.0% 30.7%  
Other income 66 55 -16.5% 343 232 -32.3%
Interest 24 25 3.8% 66 72 9.6%
Depreciation & amortisation 135 160 19.0% 507 564 11.2%
Profit before tax 540 584 8.2% 2,592 3,017 16.4%
Profit before tax margin (%) 22.8% 20.7%   27.5% 27.1%  
Tax 176 163 -7.2% 833 959 15.1%
Profit after tax 364 421 15.7% 1,759 2,058 17.0%
Net profit margin (%) 15.4% 14.9%   18.7% 18.5%  
No. of shares (m)         316.3  
Diluted earnings per share (Rs)*         6.5  
P/E (x)         18.9  
(*trailing twelve month earnings)

What has driven performance in 4QFY11?
  • Jagran Prakashan posted a 19.6% growth in revenues during the quarter and 18.4% during the full year. This has largely been on account of robust growth in advertising revenue which grew by 20% YoY for the quarter as well as the year. However, circulation revenues showed a muted growth. During the quarter, circulation revenues grew by only 4.2% YoY. For the full year, this number stood at 3.4%.

  • The other businesses like outdoor and events presented a good show. The revenues from this segment were up by 47.8% YoY during the quarter and 32.6% during the year. Digital revenues were also up nearly 170% from Rs 30.6 m in FY10 to Rs 82.4 m in FY11.

  • Higher newsprint prices resulted in raw material expenditure going up by 35% YoY and 22% in 4QFY11 and FY11 respectively. The company’s operating profits grew by 13% YoY during the quarter and 21% YoY during the year.

  • While the growth in PBT was muted at 8% YoY on account of lower other income and higher depreciation charges, net profits registered a growth of 15.7% YoY for the quarter. This was higher than the growth in PBT due to lower tax expenses. For the year, net profits grew by 17% YoY. The net profit margins remained more or less stable with a slight fall seen during the quarter.

    Cost break-up
    (% of sales) 4QFY10 4QFY11 Change FY10 FY11 Change
    Raw materials consumed 678 911 34.5% 2,736 3,332 21.8%
    % sales 28.7% 32.2%   29.0% 29.9%  
    Staff cost 319 365 14.4% 1,212 1,430 17.9%
    % sales 13.5% 12.9%   12.9% 12.8%  
    Other expenses 733 835 13.9% 2,648 2,970 12.1%
    % sales 31.0% 29.6%   28.1% 26.6%  
    Total expenditure 1,730 2,112   6,596 7,731  

What we expect?
The outdoor and event business along with the digital business is doing very well. The company is likely to face margin pressure in the short term on account of higher newsprint prices and entry of new players in the existing markets. However, Jagran Prakashan focuses on profitable growth and is likely to emerge a winner in the long run. A dividend of Rs 2 per share has been declared which implies a dividend yield of 1.6%. At Rs 123, the stock is trading at 13 times our estimated FY13 earnings. We are in the process of updating our estimates for FY14 and shall put it up by the end of June.

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