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Jagran Prakshan: Advertising remains strong

Aug 7, 2010

Jagran Prakashan has announced its 1QFY11 results. The company has reported a 16% YoY and 12% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Topline increases by 16% YoY during 1QFY11 led by a 18% YoY growth in advertising revenues.
  • EBITDA margins improve from 30% in 1QFY10 to 33% during the quarter.
  • Other income, which includes revenues from outdoor advertising, event management activity and short code services declined by 63% YoY during 1QFY11.
  • Bottomline grows by 12% YoY during the period on account of topline growth and expansion in margins, despite lower other income.

Standalone financial snapshot
(Rs m) 1QFY10 1QFY11 Change
Net sales 2,319 2,698 16.4%
Expenditure 1,614 1,796 11.3%
Operating profit (EBDITA) 705 902 27.9%
EBDITA margin (%) 30.4% 33.4%  
Other income 157 57 -63.3%
Interest 14 12 -10.4%
Depreciation 124 125 1.0%
Profit before tax 724 822 13.5%
Tax 229 266 16.0%
Profit after tax/(loss) 495 556 12.3%
Net profit margin (%) 21.4% 20.6%  
No. of shares (m)   301  
Diluted earnings per share (Rs)*   6.0  
Price to earnings ratio (x)*   20.2  
*On trailing twelve months earnings

What has driven performance in 1QFY11?
  • Jagaran Prakashan posted a topline growth of 16% YoY during 1QFY11 on the back of robust growth in advertising revenue of 18% YoY and in circulation revenue of 2% YoY over 1QFY10.

  • The company's EBITDA margins improved from 30% in 1QFY10 to 33% during the quarter due to growth in advertisement rates and low newsprint prices. Raw material cost as a percentage of sales declined by 2.2% YoY during 1QFY11.

    Cost break-up
    (Rs m) 1QFY10 1QFY11 Change
    Raw materials 701 756 7.9%
    % sales 30.2% 28.0%  
    Staff cost 289 347 20.1%
    % sales 12.5% 12.9%  
    Other expenditure 623 693 11.1%
    % sales 26.9% 25.7%  
    Total cost 1,614 1,796 11.3%
    % sales 69.6% 66.6%  

  • Jagran Prakashan's revenue from out-of-home advertising and event management grew by 50% YoY this quarter to Rs 203 m. Other income declined by 63% during 1QFY11 due to the absence of exchange fluctuation gain and lower treasury income.

  • Jagran Prakashan has entered into a scheme of arrangement with Mid-Day Multimedia in order to acquire the latter's print business from April 1, 2010. The arrangement has been approved by the board of directors of both the companies and has been filed with the High Courts of Allahabad and Maharashtra. Pending the formalities, the results of print business of Mid-Day have not been included in Jagran Prakashan's results.

What to expect?
Jagran Praksahan continues to be the leading newspaper company in India. 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 122, the company is trading at 14 times its estimated FY13 earnings. We would advise against adding fresh positions in the stock at this juncture.

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