Motilal Oswal is bullish on D B Corp has recommended buy rating on the stock with a target price of Rs 215 in its research report dated May 16, 2019.
Motilal Oswal's research report on D B Corp
4QFY19 was characterized by EBITDA margin expansion as against the steep 880bp/210bp YoY drop witnessed in 2QFY19/3QFY19. Consol. EBITDA at INR1b grew 6% YoY (5% beat), while margin expanded 20bp to 17.7%. This was due to a modest 5% YoY increase in cons. revenue to INR5.9b (in-line) coupled with a deceleration in YoY increase in RM cost, up 14% YoY (as against steep 30-35% YoY increase witnessed in 2QFY19/3QFY19). Also on QoQ basis, RM cost declined 12%, indicating a reversion of newsprint prices to normal levels (despite an increase in circulation copies). Yet, PAT declined 5% YoY to INR545m (3% miss) as growth in EBITDA was outweighed by drop in other income (-65% YoY) and higher taxes. For FY19, revenue/EBITDA/PAT grew 6%/-11%/-15%.
We value DBCL with a target price of INR215 – ascribing 9x (~40% discount to three-year average) P/E on FY21 EPS. We believe the revival in earnings driven by softening newsprint prices is not fully captured in the valuation. Maintain Buy.
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