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Jagran Prakashan: Mixed quarter - Views on News from Equitymaster
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Jagran Prakashan: Mixed quarter
Oct 23, 2008

Performance summary
  • Reports a topline growth of 18% YoY for 2QFY09 and 15% YoY for 1HFY09.

  • Operating margins decline by 4% during both the period under consideration

  • The net profits for the quarter increase by 3% YoY while they are down 4% YoY during 1HFY09.



(Rs m) 2QFY08 2QFY09 Change 1HFY08 1HFY09 Change
Net Sales 1,772 2,086 17.8% 3,606 4,151 15.1%
Expenditure 1,381 1,706 23.5% 2,701 3,275 21.2%
Operating profit 390 380 -2.6% 905 877 -3.1%
Operating profit margin (%) 22.0% 18.2% 25.1% 21.1%
Other income 37 55 47.4% 126 118 -6.3%
Depreciation 83 89 6.9% 153 172 12.3%
Interest 14 12 -20.1% 34 21 -37.7%
Profit before tax 330 334 1.4% 843 801 -5.0%
Tax 110 108 -2.2% 276 257 -6.8%
Profit after tax 220 227 3.1% 567 544 -4.2%
Net profit margin (%) 12.4% 10.9% 15.7% 13.1%
No of shares (m) 60.2 301.3 60.2 301.3
Diluted earnings per share (Rs)* 3.2
Price to earnings ratio (x)* 17.9
* 12 month trailing earnings

What has driven performance in 2QFY09?
  • J? JPL reported a topline growth of 18% YoY for 2QFY09 while the same jumped 15% YoY during 1HFY09. The ad revenues for the quarter jumped 23% YoY while they were up 17% YoY during 1HFY09. Thus, higher sales of ad space and higher ad rates led to the strong topline growth. The circulation revenues were up 2% YoY mainly on account of increase in circulation. Currently there are 7 editions, which are incurring losses as compared to 9 editions last year. JPL’s other ventures (out of home, event management and SMS) reported a 9% YoY growth during 2QFY09. The company now has 1,500 outdoor properties and has invested around Rs 500 m in the out of home segment. The topline is in line with our estimates.

    Cost break-up
    As a % of net sales 2QFY08 2QFY09 1HFY08 1HFY09
    Consumption of raw materials 37.5% 41.3% 36.1% 38.3%
    Employees Cost 12.2% 12.8% 11.6% 12.6%
    Other expenditure 28.3% 27.7% 27.1% 28.0%

  • JPL is operating margins declined by 4% during both the period under consideration. The company witnessed higher raw material prices as a percent of sales. The raw material prices (mainly newsprints prices) increased by 30% YoY during the quarter. The depreciating rupee further added to the woes as the company imports newsprint. While the labour costs were marginally higher, other expenses were on the lower side (as a percent of sales). Margins are in line with our expectations.

  • The net profits for the quarter increased by 3% YoY mainly on account of higher other income and lower interest expense. The profits for 1HFY09 declined by 4% YoY due to lower margins.

What to expect?
    At Rs 57, the stock is trading at a multiple of 9.3 times our estimated FY11 earnings. The negative macro economic environment off late has started affecting the advertising industry. The higher newsprint prices coupled with rupee fluctuations have further worsened the situation. The management expects the newsprint prices to weaken going forward, thereby aiding the margin growth. Ad revenue is expected to witness a 20% growth for the year. It also has capex plans of Rs 1.5 bn going forward, of which Rs 0.8 bn is already done. We continue to be positive on its growth prospects.

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