Buy D B Corp; target of Rs 324: Motilal Oswal

Motilal Oswal's research report on D B Corp

Consol. revenue grew 10% YoY to INR5.7b (1% miss), led by healthy growth in the Print business. Print ad revenue was up 9% YoY to INR3.4b, driven by a revival in adspend. Moreover, a 14% YoY jump in circulation copies to 5.96m drove 9% YoY growth in circulation revenue to INR1.3b. Radio revenue, too, increased 9% YoY to INR360m. Yet, consol. EBITDA fell 13% YoY to INR979m (18% miss), mainly due to a 16% rise in opex. EBITDA margin contracted 445bp to 17.3%. PAT declined 11% YoY to INR571m (17% miss) due to lower EBITDA, partly offset by lower tax. For FY18, consol. revenue rose 3% to INR23.3b (in-line), while EBITDA/PAT fell 12%/14% to INR5.9b/3.4b (4% miss).  Concall highlights: 1) Volumes to account for ~70-80% of total ad revenue growth in FY19. 2) Expect a 12-15% YoY increase in newsprint prices in 1Q/2QFY19. 3) Circulation copies to increase by 6-10% in FY19. 4) FY19 (maintenance) capex to be ~INR500-600m. 5) Management has no plans of any M&A/investment activities.

Outlook

We reduce our TP to INR324 (INR420 earlier), ascribing 13x P/E on FY20E EPS of INR25 on account of the cut in EPS and attributing a lower multiple due to cost headwinds. However, a revival in ad growth should bode well. Maintain Buy.