Buy DB Corp; target of Rs 319: Edelweiss

Edelweiss' research report on DB Corp

DB Corp’s (DBCL) Q1FY19 revenue came in line, while EBITDA and PAT surpassed estimates. Key positives: (i) ad revenue grew 5% YoY largely driven by volume (HMVL’s fell 7% YoY); and (ii) circulation revenue jumped 10.3% YoY driven by the company’s circulation expansion strategy. Key negative was the 479bps YoY slip in EBITDA margin. This was due to 27.7% YoY jump in raw material cost led by increase in newsprint price and expansion drive primarily across Bihar, Rajasthan, Madhya Pradesh and Gujarat. Going ahead, we envisage election benefit in core markets, IRS 2018 numbers and monetisation of expansion efforts to boost DBCL’s ad revenue.

Outlook

However, spurt in newsprint cost remains an overhang. Factoring the same, we cut FY19/20E PAT 8.9%/6.4%, respectively, but retain 15x FY20 target PE to arrive at revised TP of INR319 (earlier INR341). Maintain ’BUY’.