Accumulate DB Corp; target Rs 230: KRChoksey
KRChoksey is bullish on DB Corp and has recommended accumulate rating on the stock with a target price of Rs 230 in its July 21, 2012 research report.
July 28, 2012 / 14:29 IST
KRChoksey is bullish on DB Corp and has recommended accumulate rating on the stock with a target price of Rs 230 in its July 21, 2012 research report.
"DB Corp Ltd’s Q1FY13 result was slightly below our estimates. The company reported net sales of Rs 377crs, growth of 7% YoY mainly driven by increase in circulation revenue and higher revenue contribution from its radio business. EBITDA stood at Rs 81crs, declined sharply by 22.6% YoY as raw material and employee cost increased due to new launches. Consequently EBITDA margins fell by 800 bps over Q1FY12 to 21.5%. At net profit level, the company reported Rs 44crs, down by 28.8% YoY on account of higher depreciation. Net profit margin was 11.6% down by 580bps YoY. Media industry is witnessing slowdown in advertising spend and particularly print segment has seen shrinkage in national advertising revenue. Growth in regional advertising market is encouraging, however we believe it won’t suffice loss in overall advertising pie. DB Corp has shown improvement in revenue from its new launches and losses have come down significantly. Overall we expect muted revenue growth for FY13E & FY14E and margins to be under pressure due to higher operating cost and increased depreciation on account of new launches. Maintain Accumulate.DB Corp reported consolidated advertising revenue of Rs 270crs in Q1FY13 which is slightly lower 0.6% over Q1FY12. Degrowth in advertising was led by slowdown in ad spend in national markets. Although retail segment showed healthy growth in ad revenue, decline in ad revenue in national markets dampened overall ad pie. Life style, real estate sector showed growth while government ad spends shrunk. The management has restrained from giving any guidance for ad revenue for FY13E. Circulation revenue grew by 6% YoY to Rs 65.6crs. We expect healthy single digit growth to continue for rest of the year.The company reported EBITDA margin of 21.5% for Q1FY13 which is lower by 800bps YoY. Increase in newsprint consumption due to new launches and higher other operating expenses dented the margins. Increase in depreciation resulted net profit margin to fall by 580 bps to 11.6%. We believe FY13E would see deterioration in margins. However we estimate margins to improve ~150bps in FY14E as net sales will grow with revival in ad market.DB Corp’s results clearly shows sluggish ad spend for print media. Growth in local ad market is encouraging; however sharp slowdown in national ad spends remains a concern. At current price, the stock is trading at 13.1x PE to its FY14E earnings. We maintain our ACCUMULATE recommendation with a target price of Rs 230," says KRChoksey research report.Institutional holding more than 40% in Indian cos Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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