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Jagran Prak.: Margins see an uptick - Views on News from Equitymaster
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Jagran Prak.: Margins see an uptick
Aug 5, 2015

Jagran Prakashan has announced results for the first quarter of financial year 2015-2016 (1QFY16). The company has reported a 9.2% YoY growth in sales and 227% YoY growth in net profits respectively. Here is our analysis of the results.

Performance summary
  • The sales grew by 9.2% YoY during 1QFY16.
  • During the quarter, the company reported an operating profit growth of 27.5% YoY, higher than the sales growth.
  • EBITDA margin increased YoY from 22.5% to 26.3% in 1QFY16.
  • The company reported a jump of 47.7% YoY in other income.
  • Profit after tax for the company grew by 226.7% YoY.

Financial performance snapshot
(Rs m) 1QFY15 1QFY16 Change
Net sales 4,301 4,699 9.2%
Expenditure 3,333 3,463 3.9%
Operating profit (EBDITA) 969 1,236 27.5%
EBDITA margin (%) 22.5% 26.3%  
Other income 171 252 47.7%
Interest 84 127 51.2%
Depreciation & amortisation 238 231 -2.9%
Profit before tax and exceptional items 818 1,130 38.2%
Exceptional items - -  
Profit before tax 818 1,130 38.2%
Profit before tax margin (%) 19.0% 24.1%  
Tax 267 348 -
Extraordinary items (net of tax) - 1,018  
Profit after tax  551 1,799 226.7%
Net profit margin (%) 12.8% 38.3%  
Share of profits of associates 0 0  
Minority Interest (0)  
Profit after share of associates & minority interest 551 1,800  
No. of shares (m) 326  
Reported earnings per share (Rs)* 13.3  
P/E (x)*   10.0  
(*trailing twelve month earnings)

What has driven performance in 1QFY16?
  • Sales growth of the company was driven by advertisement revenue growth of 11.9% YoY during the quarter. Circulation revenues on the other hand grew 5.1% YoY. These together led to the company posting a 9.2% YoY growth in topline during the quarter.

  • Increase in advertisement revenue, coupled with lower inflation in costs and improved profitability of publication brands (other than Jagran) were primary drivers of growth in the margins as mentioned above.

  • The company concluded the acquisition of the radio business on June 10, 2015. Consequently, results for the quarter include revenue of Rs 144 m and profits of Rs 46.8 m from the radio business for the subsequent period of the quarter.

  • Extraordinary items represent profit from the sale of shares of the company by a subsidiary, allotted due to the scheme of arrangement between Naidunia Media Ltd and Jagran Prakashan Ltd.

  • Due to the expansion in margins along with this extraordinary income, profit after tax grew almost 227% YoY. Barring the effect of the extraordinary profit, the bottomline grew 41.9% YoY.
What to expect?
In terms of readership, Dainik Jagran continues to be India's largest read newspaper and has enjoyed this number one position since 2003 uninterruptedly.

It must be noted that the growth in advertising revenue during the quarter has been achieved on a high base (which included election revenue) despite the fact that the economy is yet to pick up. Except for Midday English which could not fully recover the election revenue, all publication brands posted growth in advertisement revenue. Its subsidiary Midday Infomedia delivered growth in profits by focusing on rightsizing its operating level and fixed costs.

The Company's internet business continues to grow reaching to over 50 m Internet users in the month of June 2015 as per the management. Mobile users and mobile apps are a priority for the management as it expects India to be a mobile first Internet country. Currently over 60% of the sessions were from mobile.

At the current price of Rs 133, the stock is trading at 13.1 times its trailing twelve month earnings (excluding extraordinary income). We are in process of factoring in our FY18 estimates for the stock and shall as such come out with our revised target price for the same. Till then, we recommend that investors avoid buying the stock at current levels.

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