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Jagran Prakshan: Advertising outpaces circulation growth - Views on News from Equitymaster

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  • Jun 3, 2010 - Jagran Prakshan: Advertising outpaces circulation growth

Jagran Prakshan: Advertising outpaces circulation growth

Jun 3, 2010

Jagran Prakashan has announced its FY10 results. The company has reported a 14% YoY and 92% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Topline increases by 14% YoY during FY10 led by a 16% growth in advertising revenues and 9% growth in circulation revenues.
  • EBITDA margins improve from 19% in FY09 to 30% during the year.
  • Other income, which includes revenues from outdoor advertising, event management activity and short code services grows by 51% YoY during FY10.
  • Bottomline grows by 92% YoY during the year on account of topline growth, expansion in margins and higher other income.
  • Board declares final dividend of Rs 1.5 per share, in addition to Rs 2 per share of interim dividend.

Standalone financial snapshot
(Rs m) 4QFY09 4QFY10 Change FY09 FY10 Change
Net sales 2,013   2,363 17.4% 8,234 9,419 14.4%
Expenditure 1,622 1,730 6.6% 6,667 6,596 -1.1%
Operating profit (EBDITA) 390 633 62.2% 1,567      2,823 80.1%
EBDITA margin (%) 19.4% 26.8%   19.0% 30.0%  
Other income 64 66 2.3% 227 343 50.8%
Interest 20 24 20.9% 59           66 11.3%
Depreciation 113 135 19.8%      383         507 32.4%
Profit before tax 322 540 67.5% 1,352 2,592 91.7%
Tax 104 176 69.2% 436 833 91.2%
Profit after tax/(loss) 218.2 363.8 66.8% 916.3 1,759.0 92.0%
Net profit margins(%) 10.8% 15.4%   11.1% 18.7%  
No. of shares (m)         301  
Diluted earnings per share (Rs)         6  
Price to earnings ratio (x)         19.6  

What has driven performance in FY10?
  • Jagaran Prakashan posted a topline growth of 14% YoY during FY10 on the back of robust growth in advertising revenue of 16% and in circulation revenue of 9% over FY09.

  • The company's EBITDA margins improved from 19% in FY09 to 30% during the year due to low newsprint prices and cost control. This is reflected in the 9.6% (as a percentage of sales) decline in raw material costs.

    Cost break-up
    (Rs m) FY09 FY10 Change
    Raw materials    3,179 2,736 -13.9%
    % sales 38.6% 29.0%  
    Staff cost 1,065 1,212 13.8%
    % sales 12.9% 12.9%  
    Other expenditure    2,423    2,648 9.3%
    % sales 29.4% 28.1%  
    Total cost    6,667    6,596 -1.1%
    % sales 81.0% 70.0%  

  • Jagran Prakashan's revenue from out-of-home advertising and event management grew by 29% YoY this year to Rs 709 m. Other income as a whole grew by 51% during FY10.

  • The company's flagship paper Dainik Jagran was confirmed as the most read newspaper in India for by the Indian Readership Survey 2010Q1.
  • The company launched eight more editions of City Plus from Mumbai, Bengaluru, Hyderabad and Pune during the year taking the total number of editions of City Plus to 22.

What to expect?
Jagran Praksahan continues to be the leading newspaper company in the country. It is also witnessing a rise in circulation numbers. As it is more of a local player, the impact of slowdown was less than its peers. The benefit of softening newsprint prices have continued from the preceeding quarters. At the current share price of Rs 114, the company is trading at 18 times it estimated FY12 earnings. We would advice against adding fresh positions in the stock at this juncture.

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