Buy DB Corp, Jagran Prakashan for 30-35% gains: AnandRathi
According to AnandRathi DB Corp and Jagran Prakashan are expected to deliver 30-35 percent returns over the next year, driven by resumption in earnings growth and valuation rerating. "We initiate coverage on DB Corp (TP: Rs 320) and Jagran Prakashan (TP: Rs 110) with Buy, says AnandRathi research report.
July 02, 2013 / 13:11 IST
AnandRathi's research report on Media and Entertainment
Attractive structural growth opportunity: Changing demographic dynamics has ensured a surge in purchasing power in tier II and tier III cities. This, along with high resilience of the agrarian economy has spawned a buoyant market for the regional print media. The medium’s widespread appeal, high penetration, niche/localized positioning and contained impact from rising internet penetration, has enabled regional players to increase their share in advertisers’ total newspaper ad spend from 50 percent in 2007 to 60 percent in 2012. We believe it is set to reach 70 percent by 2017. Low capex intensity and high degree of market concentration (top two players account for 76 percent readership in Hindi print) would ensure that growth translates into strong investor returns.Multiple growth drivers in medium term: Election-related advertising is expected to spurt in FY14 and FY15, with the onset of election season from 3QFY14, comprising key state elections (MP, Chhattisgarh, Delhi, Rajasthan, Harayana, Maharashtra) and general elections. This, apart from cyclical recovery in ad spending, is expected to drive 12-13 percent ad revenue growth in FY14 for companies covered by us (versus 4-7 percent in FY13). Waning competition and stable newsprint prices are other medium-term growth drivers. We expect our coverage companies to record 22 percent CAGR in earnings over FY13-15.DB Corp. and Jagran Prakashan strong bets: They offer quality exposure to structural and cyclical growth factors, owing to their ring fenced position in regional print (combined 20 percent share of readership). Also, both enjoy strong brand equity, formidable track record of growth (26 percent and 12 percent earnings CAGR over FY07-13, respectively), robust profitability (RoEs consistently around 20 percent), free cash flows (dividend payouts of over 45 percent) and low leverage.Our take: "We expect DB Corp. and Jagran Prakashan to deliver 30-35 percent returns over the next year, driven by resumption in earnings growth and valuation rerating. They are currently trading at 13-32 percent below average P/E of the past three years. We initiate coverage on DB Corp. (TP: Rs 320) and Jagran Prakashan (TP: Rs 110) with Buy. Risks. Prolonged economic slowdown, rise in newsprint prices," says AnandRathi research report.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. 
Read More
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
