ICICI Direct recommended hold rating on Jagran Prakashan with a target price of Rs 108 in its research report dated February 05, 2019.
ICICI Direct's research report on Jagran Prakashan
Jagran Prakashan reported a topline of Rs 613.8 crore, up 2.6% YoY, largely in line with expectations. Print ad revenues improved by a mere 2.2% YoY (vs. our expectation of 3% YoY improvement) to Rs 364 crore while circulation revenues were also weak at Rs 108.0 crore (2.1% YoY decline), possibly on account of clamping down on copies on account of elevated newsprint costs. Radio revenues came in strong with 14% YoY growth (13% YoY growth expectations) EBITDA came in at Rs 131.6 crore, lower than our expectation of Rs 138.7 crore, owing to elevated newsprint prices and higher-than-anticipated marketing costs. EBITDA margins also came in weak at 21.4%, ~580 bps YoY decline vs. our expectation of 22.7% PAT came in at Rs 65.6 crore, slightly ahead of expectations on account of higher-than-expected other income at Rs 15.8 crore (vs. Rs 6.0 crore).
The fact that Jagran’s print ad growth has been consistently lagging vis-à-vis its key peer DB Corp, restricts us from turning constructive. The management guidance of a mediocre print ad growth despite DAVP ad hike impact also disappoints us. We now lower our earnings estimates for FY20 by ~12%. Despite alluring valuations of ~8.3x FY21, we assign a HOLD rating as we await a recovery in ad growth. We roll over our valuations to FY21 and cut our target price to Rs 108, largely to incorporate the earnings cut. Our target price implies 9x FY21E earnings (vs. 10x for DB Corp).
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