BUY CMP 128.00 Target Price 145.00 JAGRAN PRAKASHAN LTD Result Update (PARENT BASIS): Q3 FY15 APRIL 11 th 2015 ISIN: INE199G01027 Index Details Stock Data Sector Publishing BSE Code 532705 Face Value 2.00 52wk. High / Low (Rs.) 154.40/99.00 Volume (2wk. Avg.) 143000 Market Cap (Rs. in mn.) 41844.48 Annual Estimated Results (A*: Actual / E*: Estimated) YEARS FY14A FY15E FY16E Net Sales 15890.32 16875.48 18293.02 EBITDA 4275.29 4623.74 5009.23 Net Profit 2330.44 2270.90 2440.81 EPS 7.13 6.95 7.47 P/E 17.96 18.43 17.14 Shareholding Pattern (%) 1 Year Comparative Graph JAGRAN PRAKASHAN LTD S&P BSE SENSEX SYNOPSIS Jagaran prakashan ltd, a media and Communications Company is engaged in the printing and publication of newspapers and magazines primarily in India. Net sales for the quarter registered 3.09% increase and stood at Rs. 4406.32 million from Rs. 4274.37 million over the corresponding quarter of previous year. In Q3 FY15, Net profit stood at Rs. 618.95 million against Rs. 685.67 million in Q3 FY14. During Q3 FY15, Operating profit is Rs. 1267.30 million increased by 8.86% as against Rs. 1164.19 million in the corresponding period of the previous year. Profit before Tax rose by 6.47% to Rs. 947.75 million in Q3 FY15 as against Rs. 890.13 million in Q3 FY14. Advertisement Revenues for the quarter was Rs. 3384.00 million, up by 6% from Rs. 3204.00 million in Q3 FY14. Circulation Revenues at Rs. 1000.00 million, up by 8% from Rs. 924.00 mn. Other Operating Revenues stood at Rs. 321.00 million as against Rs. 411.00 mn. DainikJagran awarded 1 st Place (THE BEST COLOUR NEWSPAPER) in SANAT-2014 international competition at Sochi, Russia. The Company has entered into a share purchase agreement with the owners of Music Broadcast Pvt Ltd for acquisition of the Company and its radio business. Net Sales and Operating Profit of the company are expected to grow at a CAGR of 9% and 16% over 2013 to 2016E respectively. PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%) Jagran Prakashan Ltd 128.00 41844.48 7.13 17.96 4.40 150.00 Hindustan Media Ventures Ltd 224.50 16476.90 17.59 12.76 2.70 12.00 HT Media Ltd 118.50 27786.40 5.81 20.40 1.97 20.00 DB Corp Ltd 386.00 70888.60 17.57 21.97 6.19 72.50
Analysis & Recommendation - BUY Jagran Prakashan Ltd reported its results with Net Sales rose by 3.09% at Rs. 4406.32 million from Rs. 4274.37 million in the corresponding quarter of the previous year. PAT or Net Profit decreased by 9.73% to Rs. 618.95 million compared to Rs. 685.67 million in the corresponding quarter of the previous year. Operating Profit was at Rs. 1267.30 million as against Rs. 1164.19 million to corresponding quarter of the previous year. Profit before Tax rose by 6.47% to Rs. 947.75 million in Q3 FY15 as against Rs. 890.13 million. Advertisement revenues maintain growth of 4.7% to Rs. 3141.30 million from Rs. 3000.40 million over previous year. Circulation Revenues was up by 9.4% at Rs. 942.40 million from Rs. 861.10 million. In Q3 FY15, Digital Advertising revenue grew by 35%. In terms of total readership, Dainik Jagran has the largest number of premium NCCS A readers in the country (more than any English or language publication). The leadership position in catering to this premiere audience increases Dainik Jagran s ability to charge a premium for its space in the future. As per IRS 2012 -Q4 survey, Dainik Jagran continues to hold its No.1 position indehradun, 2 nd position in Haryana and remain No.3 Hindi newspaper of New Delhi. All publication brands including Dainik Jagran continued to improve per copy realisation which helped record highest growth in profits in spite of economy still to support advertisement spend. Digital business continues to grow from strength to strength. Jagran sites in December 2014 were ranked No.32 by COMSCORE amongst all internet sites in India, with 30 million unique users (Google Analytics). Mobile traffic contributes to 35% of the overall traffic to Jagran Sites. In News & Information companies, Jagran sites are placed at No.5. The company s news and education portals are ranked by COMSCORE No.1 in their respective domains. We recommend BUY for the scrip with the target price of Rs. 145.00 for medium and long term. QUARTERLY HIGHLIGHTS (PARENT BASIS) Results Updates- Q3 FY15 Jagran Prakashan Ltd incorporated in 1975, a media and communications company is engaged in the printing and publication of newspapers and magazines primarily in India has reported its financial results for the quarter ended 31 st Dec, 2014. Months Dec -14 Dec -13 % Change Net Sales 4406.32 4274.37 3.09 PAT 618.95 685.67 (9.73) EPS 1.89 2.07 (8.35) EBITDA 1267.30 1164.19 8.86 The company s net profit stood at Rs. 618.95 million against Rs. 685.67 million in the corresponding quarter ending of previous year, a decrease of 9.73%. Revenue for the quarter rose by 3.09% to Rs. 4406.32 million from Rs. 4274.37 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs. 1.89 a share as against Rs. 2.07 over previous year period. Profit before interest, depreciation and tax is Rs. 1267.30 million as against Rs. 1164.19 million in the corresponding period of the previous year.
Break up of Expenditure Break up of Expenditure (Rs in millions) Q3 FY15 Q3 FY14 % CHNG Material and related cost Employee Benefit Expenses Depreciation & Amortization Expense 1508.88 1528.78-1% 572.20 529.93 8% 244.57 183.77 33% Other Expenses 1063.90 1126.72-6% Latest Updates The Company has entered into a share purchase agreement with the owners of Music Broadcast Pvt Ltd for acquisition of the Company and its radio business, which is subject to the approval of Ministry of Information and Broadcasting. Application for such approval has been made. In terms of the agreement, the Company has deposited the agreed enterprise value in Escrow account with a bank. DainikJagran awarded 1 st Place (THE BEST COLOUR NEWSPAPER) in SANAT-2014 international competition at Sochi, Russia. Competition was with the newspapers printed on KBA, Man Roland, Goss and others. COMPANY PROFILE Jagran Prakashan Limited is a leading media house of India with interests spanning across newspapers, magazines, outdoor advertising, promotional marketing, event management, on ground activities and digital businesses. The Group Publishes 12 newspaper brands with over 100 editions and 250 plus sub editions from 36 different printing facilities across 15 states in 5 different languages with a total readership (TR) of 68.01 million for all its publication brands. The group is the largest print media group of the country. Established in 1942, the Group s flagship brand Dainik Jagran is the brainchild of the Freedom fighter, Late Shri Puran Chandra Gupta. Dainik Jagran is India's largest read daily with a total readership of 56.46 million (source: IRS 2012 Q4) and this numero-uno position continues since year 2003.
Dainik Jagran was voted as the most credible and trusted newspaper in India according to a Globescan survey commissioned by BBC-Reuters which was conducted across 10 leading countries including US, UK, Germany and Russia. Jagran Prakashan Limited has also been accorded the status of a Business Super brand by the Super brands Council. The Company acquired newspaper business of Naidunia Media Private Limited in FY 2012-13, which publishes 6 editions of Hindi daily Naidunia published from Indore, Ujjain, Gwalior, Jabalpur, Raipur and Bilaspur and Navdunia from Bhopal. In addition, company publishes other 3 newspaper brands I-Next, first ever bilingual newspaper published in 13 editions from 5 states, City Plus a weekly infotainment English newspaper published in 28 editions from Maharashtra, Karnataka, Andhra Pradesh and NCR and Punjabi newspaper, Punjabi Jagran published in 2 editions from Punjab. I-Next and City Plus target the youth and are compact newspapers. Besides newspapers, the company publishes 2 monthly magazines - Sakhi, targeted at women and Josh, targeted at career oriented youth. The Company also publishes annual general knowledge digest books and other publications including Coffee Table Books on various subjects ranging from travel to statistical compilations. Amongst the company s divisions, Jagran Engage provides specialized 'Out of Home' advertising services with a Pan-India footprint and Jagran Solutions provides below the line solutions and carries on activities like promotional marketing, event management and on ground activities throughout the country.
FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions) Balance Sheet as at March 31, 2013-2016E SOURCES OF FUNDS Shareholder's Funds FY13A FY14A FY15E FY16E Share Capital 663.82 653.82 653.82 653.82 Reserves and Surplus 8532.36 8856.94 11127.84 13353.41 1. Sub Total - Net worth 9196.18 9510.76 11781.66 14007.23 Non Current Liabilities Long term Borrowings 3101.96 2927.20 2751.57 2586.47 Deferred Tax Liabilities 710.73 853.87 862.41 879.65 Other Long term Liabilities 89.16 150.91 188.63 215.04 Long term Provisions 60.79 58.76 72.27 80.94 2. Sub Total - Non Current Liabilities 3962.64 3990.73 3874.88 3762.11 Current Liabilities Short term Borrowings 1648.53 1615.21 888.37 755.11 Trade Payables 881.37 1115.93 1718.53 1890.39 Other Current Liabilities 1169.64 1344.03 1283.55 1334.89 Short Term Provisions 780.10 1158.54 1019.51 937.95 3. Sub Total - Current Liabilities 4479.64 5233.71 4909.96 4918.34 Total Liabilities (1+2+3) 17638.46 18735.20 20566.50 22687.68 APPLICATION OF FUNDS Non-Current Assets Fixed Assets Tangible assets 4848.33 4998.86 5098.83 5251.80 Intangible assets 187.18 74.41 78.87 82.82 Capital Work in Progress 1310.68 1136.85 1170.96 1217.79 a) Sub Total -Fixed Assets 6346.18 6210.12 6348.66 6552.41 b) Non-current investments 3425.01 4033.71 3670.68 3964.33 c) Long Term loans and advances 719.50 562.62 588.86 618.30 d) Other non-current assets 608.11 102.75 97.61 103.47 1. Sub Total - Non Current Assets 11098.80 10909.19 10705.81 11238.51 Current Assets Current Investments 1340.48 1929.99 2412.49 2846.74 Inventories 734.30 876.33 946.44 1025.95 Trade receivables 3016.66 3248.99 3866.30 4466.15 Cash and Bank Balances 494.87 307.39 1498.50 1828.17 Short-terms loans & advances 897.58 900.02 630.01 724.51 Other current assets 55.76 563.28 506.96 557.65 2. Sub Total - Current Assets 6539.65 7826.01 9860.70 11449.17 Total Assets (1+2) 17638.45 18735.20 20566.50 22687.68
Annual Profit & Loss Statement for the period of 2013 to 2016E Value(Rs.in.mn) FY13A FY14A FY15E FY16E Description 12m 12m 12m 12m Net Sales 14118.03 15890.32 16875.48 18293.02 Other Income 212.71 464.92 149.62 161.58 Total Income 14330.74 16355.24 17025.09 18454.60 Expenditure -11129.34-12079.95-12401.35-13445.37 Operating Profit 3201.40 4275.29 4623.74 5009.23 Interest -288.57-328.06-301.69-322.81 Gross profit 2912.83 3947.23 4322.05 4686.43 Depreciation -694.70-728.94-947.27-1070.41 Exceptional Items -17.34-100.74 0.00 0.00 Profit Before Tax 2200.79 3117.55 3374.79 3616.02 Tax 4.28-787.11-1103.89-1175.20 Net Profit 2205.07 2330.44 2270.90 2440.81 Equity capital 663.82 653.82 653.82 653.82 Reserves 8532.36 8856.94 11127.84 13353.41 Face value 2.00 2.00 2.00 2.00 EPS 6.64 7.13 6.95 7.47 Quarterly Profit & Loss Statement for the period of 30 th June, 2014 to 31 st Mar, 2015E Value(Rs.in.mn) 30-Jun-14 30-Sep-14 31-Dec-14 31-Mar-15E Description 3m 3m 3m 3m Net sales 4135.36 4103.73 4406.32 4230.07 Other income 66.69 70.43 5.95 6.55 Total Income 4202.05 4174.16 4412.27 4236.61 Expenditure -3076.79-3070.49-3144.97-3109.10 Operating profit 1125.26 1103.67 1267.30 1127.51 Interest -78.80-68.43-74.98-79.48 Gross profit 1046.46 1035.24 1192.32 1048.03 Depreciation -216.71-224.30-244.57-261.69 Profit Before Tax 829.75 810.94 947.75 786.34 Tax -269.83-251.27-328.80-253.99 Net Profit 559.92 559.67 618.95 532.35 Equity capital 653.82 653.82 653.82 653.82 Face value 2.00 2.00 2.00 2.00 EPS 1.71 1.71 1.89 1.63
Ratio Analysis Particulars FY13A FY14A FY15E FY16E EPS (Rs.) 6.64 7.13 6.95 7.47 EBITDA Margin (%) 22.68 26.90 27.40 27.38 PBT Margin (%) 15.59 19.62 20.00 19.77 PAT Margin (%) 15.62 14.67 13.46 13.34 P/E Ratio (x) 19.27 17.96 18.43 17.14 ROE (%) 23.98 24.50 19.27 17.43 ROCE (%) 27.94 35.61 36.12 35.04 Debt Equity Ratio 0.52 0.48 0.31 0.24 EV/EBITDA (x) 14.18 10.33 8.99 8.09 Book Value (Rs.) 27.71 29.09 36.04 42.85 P/BV 4.62 4.40 3.55 2.99 Charts
OUTLOOK AND CONCLUSION At the current market price of Rs. 128.00, the stock P/E ratio is at 18.43 x FY15E and 17.14 x FY16E respectively. Earnings per share (EPS) of the company for the earnings for FY15E and FY16E are seen at Rs. 6.95 and Rs. 7.47 respectively. Net Sales and Operating Profit of the company are expected to grow at a CAGR of 9% and 16% over 2013 to 2016E respectively. On the basis of EV/EBITDA, the stock trades at 8.99 x for FY15E and 8.09 x for FY16E. Price to Book Value of the stock is expected to be at 3.55 x and 2.99 x for FY15E and FY16E respectively. We recommend BUY in this particular scrip with a target price of Rs. 145.00 for Medium to Long term investment. INDUSTRY OVERVIEW Print Industry The foremost achievement of the industry in otherwise not too good year was its ability to increase subscription revenue at more or less same rate at which its advertisement revenue grew. Increase in subscription revenue was more on account of the increase in cover price than the increase in volume. This has never happened in the recent past. It is a good sign for the industry and is a right step in the direction of strengthening business model of print media companies and makes them less dependent on movement in economy, which has direct bearing on
advertisement spend. We are still far behind even less developed countries in terms of cover price of newspaper. These efforts should, therefore, continue if we have to provide the quality contents, reward the stake holders and maintain highest degree of independence expected of print media. As the operating results for the year 2013-14 of print media companies would show, realization per copy of newspaper has much higher operating leverage than commonly believed advertisement revenue. We should therefore continue to focus in this area and should sincerely endeavor to improve the cover prices as and when an opportunity arises. Even though the fiscal 2013-14 was better than fiscal 2012-13, the print industry could register growth of around 10% which is just above inflation looking into the huge potential that is available for the industry. However, Hindi and other Indian language newspapers recorded higher growth primarily due to huge untapped potential which will keep driving their growth in future as well, low penetration coupled with increasing literacy and income in their areas of operation do not let these newspapers suffer as much as English print media from overall economic slowdown and help them register higher growth. This trend will continue in future too. The industry does not have any threat from any form of media including evolving media and its growth shall remain unabated in foreseeable future. Nonetheless, changing with the time, timely identification of need gap of customers and embracing the technology will remain key to the success. As far as Hindi print industry is concerned, it currently has 32% share in the print industry but in next 5 years it is expected to be the leader. Not long ago, its share was 25%. For the large publishers, the intensity of the competition especially in their areas of dominance was well within control and all such publishers are fully geared up to capitalize on upturn in economy. However, the fragmentation of industry, which is a huge challenge for it, continues. Nearly, 7000 new publications were registered with the Registrar of Newspapers of India in the fiscal 2012-13 taking the total number of publications over 94000. The number of new publications registered was highest since 2002-03. This kind of a fragmentation is neither helping the consumer nor the industry but is deterrent to the expansion of overall industry and results in unnecessary discounting and waste of resources. We reiterate our belief that sustainable growth of the industry that can reward all the stakeholders lies in consolidation and not fragmentation. As for magazines, they continue to lose ground and their growth continues to taper year after year. For the print industry, FMCG became the top advertiser followed by automobile and education. Real estate sector too did very well in tier-2 and tier-3 towns even if it remained muted in bigger towns. We believe that the steep growth in education sector, which was being witnessed till a few years back, may not be repeated in short term but the ground realities suggest that this sector will continue to remain one of the top categories of advertisers. Hindi publications recorded pretty high growth in advertisement revenue, also because almost all the publishers took increase in advertisement rates to meet the increased cost of operations. The industry was further
supported by 19% increase in DAVP rates from October 2013 in an otherwise difficult year. For Hindi and other Indian language newspapers, advertisement rates are still low and have potential to grow further given their reach and effectiveness. In terms of cost, increase in prices of domestic newsprint and increase in cost of imported news print due to appreciating dollar were beyond expectations and made the industry suffer. Any further significant increase does not seem to be reality but at the same time any fall in prices from current level too is not expected. As a result, we will see significant impact of already increased prices in 2014-15 as well which may comfortably be off-set by the gains of already increased cover prices and advertisement revenue Disclaimer: This document is prepared by our research analysts and it does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable but we do not represent that it is accurate or complete and it should not be relied on as such. Firstcall Research or any of its affiliates shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Firstcall Research and/ or its affiliates and/or employees will not be liable for the recipients investment decision based on this document.
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