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Buy DB Corp; target of Rs 218: KRChoksey

KRChoksey is bullish on DB Corp and has recommended buy rating on the stock with a target of Rs 218 in its May 8, 2012 research report.

May 08, 2012 / 04:27 PM IST
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KRChoksey is bullish on DB Corp and has recommended buy rating on the stock with a target of Rs 218 in its May 8, 2012 research report.

“DB Corp Ltd reported net sales of Rs 361cr which increased by 13.6% YoY. This was driven by 5.4% YoY advertising growth to Rs 263cr and increased contribution from other business segments. EBITDA stood at Rs 76cr, down by 5% over Q4FY11 as an outcome of increase in raw material cost and other expenses. EBITDA margins slipped by 410bps to 21% for Q4FY12. Net profit for the quarter was Rs 45cr, unchanged over Q4FY11 however net profit margin declined by 170bps to 12.5%. Slowdown in advertising revenue had an adverse impact on top line and new launches caused higher inventory utilization and operating expenses resulting lower profitability. Management’s commentary on local ad revenue growth was encouraging; however national advertising would remain lackluster. Higher operating expenses and increase in depreciation due to new launches will drag the margins.”

“DB Corp reported consolidated advertising revenue of Rs 263crs in Q4FY12 which is marginally increased by 5.4% over Q4FY11however declined by ~14% on a sequential quarter. Growth in advertising was mainly driven by local advertising which grew by 20% YoY. The major sectors which contribute to national advertising like auto, consumer durables, and real estate showed slowdown in ad spends. Ad revenue from government side also disappointed. The management guided 20% growth in local advertising for matured editions. However we believe national advertising revenue will be a spoilsport. The company reported healthy growth in revenues however operating margins declined 410bps to 21% due to increase in raw material cost and other operating expenses on account of new launches. Also increase in depreciation will dent the net profitability. Losses in new editions will drag overall profitability of the company.”

“Media industry has been facing slowdown in advertising spend led by slowdown in economy. Although print media has major contribution from local advertising, degrowth in national advertising is a major concern. We believe the major players will face another year of sluggish advertising revenue growth on the back of microeconomic concerns. Although circulation revenue will increase, the growth will be negligible. We recommend ACCUMULATE on the stock with a target price of Rs 218 by assigning 16x PE to FY13 earnings,” says KRChoksey research report.   

Institutional holding more than 40% in Indian cos

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first published: May 8, 2012 04:14 pm

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