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Jagran Prakashan: Newsprint costs booster - Views on News from Equitymaster

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Jagran Prakashan: Newsprint costs booster
Oct 29, 2009

Performance summary
  • Topline increases by 18% YoY during 2QFY10 led by a 20% growth in advertising revenues and 15% growth in circulation revenues.
  • EBITDA margins improved from 18% in 2QFY09 to 34% during the quarter due to low newsprint prices and cost control.
  • Other income, which includes revenues from outdoor advertising, event management activity and short code services declines by 8% YoY during 2QFY10.
  • Bottomline grows by 122% YoY during the quarter on account of topline growth and expansion in margins.
  • Declareas an interim dividend of Rs 2 per share.


Standalone financial snapshot
(Rs m) 2QFY09 2QFY10 Change 2QFY09 2QFY10 Change
Net sales 2,086 2,468 18.3% 4,151 4,787 15.3%
Expenditure 1,706 1,636 -4.1% 3,275 3,249 -0.8%
Operating profit (EBDITA) 380 832 119.1% 876 1,538 75.4%
EBDITA margin (%) 18.2% 33.7%   21.1% 32.1%  
Other income 55 50 -8.2% 118 207 75.7%
Interest 12 15 27.6% 21 28 32.9%
Depreciation 89 130 46.5% 172 254 47.2%
Profit before tax 334 738 120.6% 800 1,462 82.7%
Tax 108 235 118.8% 257 465 80.8%
Profit after tax/(loss) 227 503 121.5% 543 998 83.6%
Net profit margin (%) 10.9% 20.4%   13.1% 20.8%  
No. of shares (m)         301  
Diluted earnings per share (Rs)*         5  
Price to earnings ratio (x)*         25.3  
*On trailing 12 months earnings

What has driven performance in 2QFY10?
  • Jagaran Prakashan posted a strong topline growth of 18% YoY during 2QFY10 on the back of robust growth in advertising revenue of 20% and in circulation revenue of 15% over 2QFY09.

  • The company’s EBITDA margins improved from 18% in 2QFY09 to 34% during the quarter due to low newsprint prices and cost control. This is reflected in the 14% (as a percentalge of sales) decline in raw material costs.

    Cost break-up
    (Rs m) 2QFY09 2QFY10 Change
    Raw materials 862 684 -20.7%
    % sales 41.3% 27.7%  
    Staff cost 267 300 12.0%
    % sales 12.8% 12.1%  
    Other expenditure 578 653 12.9%
    % sales 27.7% 26.4%  
    Total cost 1,707 1,636 -4.2%
    % sales 81.8% 66.3%  

  • Jagran Prakashan’s revenue from out-of-home advertising and event management grew by 36% YoY this quarter to Rs 170 m. However, other income as a whole declined by 8% during 2QFY10.

  • The company launched one more edition of City Plus from Vashi, Navi Mumbai, taking total number of editions of City Plus to 18.

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. It had been unable to pass on the price of higher newsprint costs and any further price hikes also seems doubtful. However, the benefit of softening newsprint prices have started kicking in and are likely to continue in the forthcoming quarters. At the current share price of Rs 115, the company is trading at 25 times it trailing 12 months earnings. We shall soon update our view on the stock.

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