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Jag. Prak.: Zero tax, other income save the day
Nov 1, 2012

Jagran Prakashan has announced results for second quarter of financial year 2012-2013. The company has reported a 5.5% YoY growth in sales and a 51.7% growth in net profits. Here is our analysis of the results.

Performance summary
  • The sales grew by 5.5% YoY during the quarter and by 4.8% during the half year period ended September 2012.
  • Growth in advertising was dismal at 3.64% YoY as compared to the same quarter last year. Circulation witnessed an increase of 8.88% YoY during the quarter.
  • In other services, event and outdoor registered 15.8% YoY and digital segment witnessed 15.4% YoY increase in revenues respectively.
  • Jagran's raw material costs did not rise much but employee costs were up by 18% YoY during the quarter. This resulted in operating costs going up by 7.8% YoY.
  • Operating profit was thus down by 1.1% YoY and operating margins declined by 1.6%.
  • Other income went up by 236% YoY and interest expenses increased by 107% YoY.
  • Jagran did not report any taxes to be paid on account of tax implications of its recent acquisition of Nai Dunia. As such, the net profit was up by 51.7% YoY during the quarter and by 31.1% YoY during the 6 month period.

Financial performance snapshot
(Rs m) 2QFY12 2QFY13 Change 1HFY12 1HFY13 Change
Net sales 3,054 3,221 5.5% 6,101 6,396 4.8%
Expenditure 2,263 2,439 7.8% 4,483 4,826 7.6%
Operating profit (EBDITA) 791 782 -1.1% 1,617 1,570 -2.9%
EBDITA margin (%) 25.9% 24.3%   26.5% 24.5%  
Other income 40 133 236.0% 111 126 13.1%
Interest 29 59 106.9% 56 135 140.5%
Depreciation & amortisation 160 161 0.7% 310 309 -0.4%
Profit before tax 642 694 8.2% 1,362 1,252 -8.1%
Profit before tax margin (%) 21.0% 21.6%   22.3% 19.6%  
Tax 184 - -100.0% 407 - -100.0%
Profit after tax 458 694 51.7% 955 1,252 31.1%
Net profit margin (%) 15.0% 21.6%   15.7% 19.6%  
No. of shares (m)           316.27
Diluted earnings per share (Rs)*           6.62
P/E (x)           14.81

What has driven performance in 2QFY13?
  • Jagran's sales grew by 5.5% YoY during the quarter and by 4.8% YoY during the 6 month period.

  • Growth in advertising was dismal at 3.64% YoY as compared to the same quarter last year. However, it was still the best in the industry. Circulation witnessed an increase of 8.88% YoY during the quarter. Increase in circulation was on account of hike in cover prices. Jagran has taken price hikes across its markets in passed manner.

  • In other services, event and outdoor registered 15.8% YoY and digital segment witnessed 15.4% YoY increase in revenues respectively.

  • Jagran's raw material costs did not rise much. They were up by only 3% YoY. This was because of an improved mix of raw material, strict monitoring of pagination and saving wastages. However, employee costs were up by 18% YoY during the quarter. This resulted in operating costs going up by 7.8% YoY.

  • Operating profit was thus down by 1.1% YoY during the quarter and by 2.9% YoY for the half year. Operating margins declined by 1.6% during the quarter.

  • Other income went up by 236% YoY and interest expenses increased by 107% YoY.

  • Jagran did not report any taxes to be paid on account of tax implications of its recent acquisition of Nai Dunia. As such, the net profit was up by 51.7% YoY during the quarter and by 31.1% YoY during the 6 month period.

    Cost break-up
    (% of sales) 2QFY12 2QFY13 Change 1HFY12 1HFY13 Change
    Raw materials consumed 1,075 1,109 3.1% 2,065 2,243 8.7%
    % sales 35.2% 34.4%   33.8% 35.1%  
    Staff cost 376 443 18.0% 768 853 11.1%
    % sales 12.3% 13.8%   12.6% 13.3%  
    Other expenses 812 887 9.2% 1,651 1,729 4.8%
    % sales 26.6% 27.5%   27.1% 27.0%  
    Total expenditure 2,263 2,439   4,483 4,826  

What to expect?
Although Jagran has displayed weakness in advertising revenue growth, it is still the best amongst peers in the print media space. The print media company has been able to report growth in revenues from its existing editions unlike peers. There has not been any addition in editions in past year or so. Jagran expects Mid Day and recently acquired Nai Dunia to start contributing substantially from the next year. At Rs 98, the stock is trading at 15 times its trailing twelve month earnings. We maintain our Hold view on the stock.

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