Buy Deccan Chronicle; target of Rs 128: Angel Broking

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Buy Deccan Chronicle; target of Rs 128: Angel Broking

Angel Broking is bullish on Deccan Chronicle Holdings (DCHL) and has recommended buy rating on the stock with a target of Rs 128 in its February 14, 2011 research report.

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Angel Broking is bullish on Deccan Chronicle Holdings (DCHL) and has recommended buy rating on the stock with a target of Rs 128 in its February 14, 2011 research report.

"Post Deccan Chronicle Holdings' (DCHL) 3QFY2011 results, we have revised our estimates downwards primarily to factor in lower revival in advertisement volume. The company posted dismal results for the quarter, with top-line de-growth of 14.5% yoy and earnings decline of 54.7% yoy impacted by margin contraction of 1,648bp yoy. Owing to attractive valuations."

"DCHL reported top-line decline of 14.5% yoy/15.7% qoq to Rs 200 crore (Rs 233 crore /Rs 237 crore) and below our estimate of Rs 258 crore (~11% yoy growth), despite 3QFY2011 recording the complete festive season. On the operating front, DCHL registered margin contraction of 1,648bp yoy/1,204bp qoq, impacted by gross margin contraction and lower operating leverage. Earnings for the quarter declined 55% yoy/57% qoq to Rs 35 crore (Rs 78 crore /Rs 83 crore), impacted by increase in interest expense, depreciation charge and margin contraction, though cushioned by higher other income."

"We are lowering our target P/E multiple from 12x to 10x owing to concerns relating to the merger of its 100% subsidiaries, Deccan Chargers Sporting Ventures, Odyssey Indian and Netlink Technologies with itself and high volatility in garnering advertisement volumes owing to the political instability in Andhra Pradesh. At Rs 81, the stock is trading at attractive valuations of 8.2x FY2013E EPS of Rs 9.9. We maintain a Buy on the stock, with a SOTP target price of Rs 128 based on: 1) 10x FY2013E earnings for its core print business fetching Rs 98/share, and 2) Rs 30/share value for the IPL Team (30% discount to the per share value calculated, based on USD 225mn floor price for new teams' auction)," says Angel Broking research report.

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To read the full report click on the attachment