Accumulate DB Corp; target of Rs 236: Angel Broking

Angel Broking is bullish on DB Corp and has recommended accumulate rating on the stock with a target of Rs 236 in its October 5, 2012 research report.

“DB Corp’s advertising revenue growth is expected to pick up from the third quarter of the current financial year, aided by the festival season as well as lower base effect. The national advertising revenues which had witnessed a decline in 1QFY2013 are also expected to bounce back going forward. OPM pressure to ease: The cyclical nature of ad revenue growth (sluggish due to slower GDP growth), a Rs77cr loss at EBITDA level on emerging editions, increase in newsprint cost and a sharp depreciation in the rupee had contributed to margin erosion in FY2012. However, an expected uptick in ad revenue, a likely reduction in EBITDA level loss to Rs44cr for emerging editions, decrease in newsprint cost in USD terms and appreciation in the rupee will result in at least a 100-150bp OPM expansion for FY2013.”

“The Company has an advertising focused revenue model with average cover prices being the lowest among peers at Rs2.6. The company believes there is still scope to increase circulation even in its mature markets and hence is still following the penetration strategy. However, cover prices have been marginally increased in selective markets such as Haryana, Chhattisgarh and a few regions of Madhya Pradesh where the scope for further penetration is limited. New launches on backburner: The slowdown in ad revenues during the last few quarters is expected to delay DB Corp’s entry in Bihar, at least by a year. However, the company may still go ahead with smaller launches in Maharashtra at Akola, Amravati and Latur depending upon improvement in the ad market.”

“At the CMP, DB Corp is trading at 15.3x FY2014E consolidated EPS of Rs 13.6. We recommend accumulate on the stock with a target price of Rs 236, 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) sharp rise in newsprint prices in INR terms, 2) higher-thanexpected losses/increase in the breakeven period of the new launches,” says Angel Broking research report.

Public holding more than 90% 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

Read More