Buy DB Corp; target of Rs 236: Angel Broking

“DB Corp. (DBCL) reported weak performance on the earnings front, primarily due to continued margin pressure during last few quarters and a Rs7cr hit due to forex exposure. The slowdown in GDP growth impacting advertising revenues, rupee depreciation impacting newsprint costs and operating losses on recent editions launched in Maharashtra and Jharkhand has led to decline in margins.”

“For 1QFY2013, the company’s top line grew by 7.0% yoy to Rs377cr driven by 15.5% yoy growth in circulation revenue to Rs66cr on account of volume growth due to new launches in past few quarters and selective increase in cover prices. Advertising revenue remained flat at Rs270cr. Operating margins fell by 594bp yoy to 22.2% led by 12.5% increase in raw-material expenses and 18.6% increase in employee costs. However, operating margin expanded by 282bp qoq due to cost rationalization measures undertaken by the company. The company reported 28.5% yoy decline in reported PAT to Rs44cr due to margin pressure and Rs7cr hit on forex exposure. After adjusting for exceptional items, recurring profit stood at Rs49cr, a 18.2% decline on yoy basis.”

“At the CMP, DBCL is trading at 14.6x FY2014E consolidated EPS of Rs13.9. We maintain our Buy view on the stock with a revised target price of Rs236, based on 17x FY2014E EPS, benchmarking it to our print media sector valuations (which are at ~15% premium to our sensex target valuation multiple). Downside risks to our estimates include 1) any further rise in newsprint prices, 2) competition becoming fierce, impacting ad rates/volumes,” says Angel Broking research report.

Public holding more than 90% in Indian cos

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