Buy DB Corp; target of Rs 289: Angel Broking
Brokerage house Angel Broking is bullish on DB Corp and has recommended 'buy' rating on the stock with a target price of Rs 289 in its research report of dated October 15, 2013.
October 21, 2013 / 12:36 PM IST
Angel Broking's report on DB Corp
"For 2QFY2014, DB Corp’s (DBCL) top-line and bottom-line performance was in-line with our expectations. Its top-line grew by 15.8 percent yoy to Rs 438cr, primarily due to a robust 16.7 percent yoy growth in advertising revenue to Rs 330cr (driven equally by increase in ad volume as well as yields). Sectors such as lifestyle, education, automobile, FMCG and healthcare have contributed to the strong growth in the company’s advertising revenues. However, with the advent of state elections, the government has been the biggest contributor in the quarter, as new schemes were being rolled out, before the Election Commission enforced a code of conduct. The company also reported a strong 14.0 percent yoy growth in circulation revenue to Rs 80cr."
"At the operating level, the EBITDA grew by 25.2 percent yoy to Rs 108cr, in spite of incurring a pre-operative marketing and launch expenditure of Rs 2cr for new editions and forex loss of Rs 5cr. Mature editions reported a 139bp yoy margin expansion to 31 percent. Losses in emerging editions stood at Rs 8cr in 2QFY2014 compared to Rs 10cr in 1QFY2013. Consequently, the OPM expanded by 185bp yoy to 24.6 percent and net profit grew by 23.8 percent yoy to Rs 60cr. Amravati edition launched, Patna edition soon: Following the launch of Akola edition in July, DBCL launched the Amravati edition in August, taking the total editions in Maharashtra to 7. By the end of Q3FY2014, DBCL is expected to enter Bihar by launching the Patna edition. Bihar’s advertising market size is expected to be ~Rs 400cr with Patna cornering almost 50-55 percent of the total market. The company expects to incur a capex of Rs 20cr to Rs 25cr for the Patna edition."
Outlook and valuation: "At the current market price, DBCL is trading at 14.3x FY2015E consolidated EPS of Rs 17.3. We maintain our Buy view on the stock with a target price of Rs 289, based on 16.7x FY2015E EPS, benchmarking it to our print media sector valuations (which are at ~15 percent premium to our Sensex target valuation multiple). The downside risks to our estimates include 1) sharp rise in newsprint prices in INR terms, and 2) higher-than-expected losses/increase in the breakeven period of the new launches," says Angel Broking research report.
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