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Jagran Prak.: Higher newsprint costs dent margins - Views on News from Equitymaster
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Jagran Prak.: Higher newsprint costs dent margins
Aug 8, 2011

Jagran Prakashan has announced its 1QFY12 results. The company has reported a 12.9% YoY growth in sales and a 10.6% fall in net profits. Here is our analysis of the results.

Performance summary
  • Top line increased by 12.9% YoY during the quarter.
  • EBITDA margins declined by 6.5% YoY during the quarter from 33.4% to 26.9%.
  • Net profits fell by 10.6% in this quarter. The PAT margins are down by nearly 7%.

Standalone financial snapshot
(Rs m) 1QFY11 1QFY12 Change
Net sales 2,698 3,046 12.9%
Expenditure 1,796 2,226 23.9%
Operating profit (EBDITA) 902 820 -9.0%
EBDITA margin (%) 33.4% 26.9%  
Other income 57 78 35.1%
Interest 12 28 125.0%
Depreciation & amortisation 125 150 20.1%
Profit before tax 822 720 -12.4%
Profit before tax margin (%) 30.5% 23.6%  
Tax 266 223 -16.1%
Profit after tax 556 497 -10.6%
Net profit margin (%) 20.6% 16.3%  
No. of shares (m)   316.27  
Diluted earnings per share (Rs)*   6.3  
P/E (x)   17.9  
* On a trailing 12 months basis

What has driven performance in 1QFY12?
  • Jagran Prakashan posted a 12.9% growth in revenues as compared to same period last year. Advertising revenues grew by 7.7% and circulation by 5.2%.

  • The other businesses like outdoor and events presented a better picture. The revenues from this segment were up by 80.3% from Rs 187.1 m to Rs 337.3 m. Digital revenues too grew by 41.6%.

  • Higher newsprint costs resulted in raw material cost going up by 31% YoY. This resulted in a 6.5% YoY fall in operating margins over the corresponding quarter last financial year. Staff expenses were up by 13% YoY and other expenses by 21.9% YoY.

  • Poor performance at the operating level coupled with high interest costs, which were up by 125% YoY led to the fall in net profits as well as net margins.
  • Cost break-up
    (% of sales) 1QFY11 1QFY12 Change
    Raw materials consumed 756 989 30.8%
    % sales 28.0% 32.5%  
    Staff cost 347 393 13.0%
    % sales 12.9% 12.9%  
    Other expenses 693 844 21.9%
    % sales 25.7% 27.7%  
    Total expenditure 1,796 2,226  

What to expect?

A new publication Jagran Punjabi was launched during the quarter. The company has also expanded operations for its Urdu newspaper The 'Inquilab' which it had acquired from Midday Infomedia Limited. Jagran now has publications in 5 languages including Hindi, Gujarati, Urdu, English and Punjabi. At Rs 113, the stock is trading at 18 times its trailing 12 month earnings. We have a cautious view on the stock.

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