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Jagran Prak.: Boost from advertisement

Nov 4, 2010

Jagran Prakashan has announced its 2QFY11 results. The company has reported a 12.2% YoY and 10.4% YoY growth in sales and net profits respectively. Here is our analysis of the results

Performance summary
  • Top line increases by 12.2% YoY during 2QFY11 led by a 12.7% YoY growth in advertising revenues.
  • EBITDA margins fall from 33.7% in 2QFY10 to 32.8% during the quarter.
  • Other income, which includes revenues from outdoor advertising, event management activity and short code services grew by 27.3% YoY during 2QFY11.
  • Bottom line grew by 10.4% YoY during the period on account of top line growth fall, increase in other income and fall in interest costs, despite lower operating income.
  • For 1HFY11, net profit grew by 11.3% YoY while net profit margin fell by 0.5% to stand at 20.3%. This performance comes on the back of fall in other income and higher effective tax rate.

Standalone financial snapshot
Rs(m) 2QFY10 2QFY11 Change 1HFY10 1HFY11 Change
Net sales         2,468         2,769 12.2%         4,787         5,467 14.2%
Expenditure         1,636         1,860 13.7%         3,249         3,657 12.5%
Operating profit (EBDITA)            832            908 9.1%         1,538         1,810 17.7%
EBDITA margin (%) 33.7% 32.8%   32.1% 33.1%  
Other income               50               64 27.3%            207            121 -41.3%
Interest               15               14 -4.6%               28               26 -7.4%
Depreciation            130            133 2.1%            254            258 1.6%
Profit before tax            738            826 11.9%         1,462         1,648 12.7%
Extraordinary inc/(exp) -   -                    -                  -    
Tax            235            271 15.0%            465            537 15.5%
Profit after tax/(loss)            503            555 10.4%            998         1,111 11.3%
Net profit margin (%) 20.4% 20.0%   20.8% 20.3%  
No. of shares (m)            301            301              301            301  
Diluted earnings per share (Rs)*                      6.2  
Price to earnings ratio (x)*                 20.8  
*trailing twelve months

What has driven performance in 2QFY11?
  • Jagaran Prakashan posted a top line growth of 12.2% YoY during 2QFY11 on the back of robust growth in advertising revenue of 12.7% YoY and in circulation revenue of 1% YoY over 2QFY11.

  • The company's EBITDA margins fell from 33.7% in 2QFY10 to 32.8% in 2QFY11. This fall came on the back of higher raw material costs as well as higher staff costs. While raw material costs increased by 17% YoY to stand at 28.9% of sales, staff costs increased by 18% YoY to stand at 12.8% of sales. However fall in other expenditure helped support margins during the quarter.

    Cost break-up
    As a % of sales 2QFY10 2QFY11 1HFY10 1HFY11
    Raw material 27.7% 28.9% 28.9% 28.5%
    Staff costs 12.1% 12.8% 12.3% 12.8%
    Other expenditure 26.4% 25.5% 26.7% 25.6%

  • Jagran Prakashan's revenue from out-of-home advertising and event management grew by 22.4% YoY this quarter to Rs 208 m. Other income grew by 27.3% during 2QFY11 due to strong performance by event, outdoor and digital businesses.

  • 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 we expect?
At Rs 129.9, the stock is trading at 14.4 times our estimated FY13 earnings (RPro subscribers click here). Jagran Prakashan 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 preceding quarters. We would advise against adding fresh positions in the stock at this juncture.

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