Hold DB Corp; target of Rs 250: ICICI Direct
ICICI Direct recommended hold rating on DB Corp with a target price of Rs 250 in its research report dated July 20, 2018.
September 18, 2018 / 03:19 PM IST
ICICI Direct's research report on DB Corp
Overall revenues came in at Rs 632.4 crore (up 6.7% YoY), marginally below our estimate of Rs 636.1 crore, on account of lower-than-expected print ad revenue growth of 5.3% YoY (vs. our expectation of 7% YoY) at Rs 411 crore. Print ad growth for the quarter was largely driven by volume. Circulation revenues came in at Rs 134.5 crore, up 10.2% YoY and better than our expectation of growth of 8.1% YoY, due to volume growth across the market. Radio ad revenues were weak at Rs 31.7 crore, growth of mere 1.6% YoY (vs. our expectation of 7% YoY growth), owing to heavy advertisement by central government in the base quarter, which was missing this quarter EBITDA came in at Rs 168 crore (down 9.8% YoY), a tad better than our expectation of Rs 165 crore. Other operating expenses came in much lower than our expectations, which more or less compensated for a sharp increase in newsprint costs (27.3% YoY). EBITDA margins came in at 26.6%, 70 bps above our expectations The company reported a PAT of Rs 97.6 crore (decline of 11.4% YoY), largely in line with our expectations of Rs 95.8 crore.
The print sector continues to be impacted by slower than anticipated recovery in ad environment as the impact of legislative reforms (GST, RERA) has hurt the localised category such as education, real estate, jewellery, etc. steeply. Therefore, the overall print ad growth revival is likely to be a gradual process. We also cut our earnings estimate further as we build in higher newsprint and other costs. Given the lack of growth visibility and earnings uncertainty, we cut our target price further. We value the company at 12x FY20E EPS of Rs 20.9 with a target price of Rs 250. We maintain our HOLD rating on the stock.
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