Buy DB Corp; target of Rs 465: Motilal Oswal

DBCL’s key markets are set to witness elections over the next three years – Punjab and Gujarat state elections in April-July 2017; MP, Chhattisgarh and Rajasthan (core markets) state elections in October-November 2018; general elections in April 2019; and Haryana and Maharashtra state elections in 2020). The slew of elections should support ad volumes. In FY14, when DBCL’s core markets – MP, Chhattisgarh and Rajasthan – went to elections, DBCL clocked 17% ad growth. Election-led ad sales typically come at higher yields and with better cash conversion cycle, as payments are made in advance. The Ad:Edit ratio, which is typically 30-31%, also increases during election periods and festive seasons to 33- 35%. The management seems confident of clocking 12-14% ad CAGR over the next three years. (We estimate 14% ad CAGR over FY16-18).

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