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Event update: Media - Mixed bag; DBCL relative position weakens…

Event:

DB Corp Ltd. has shared daily or ‘Average Issue Readership’ (AIR) results of the Indian Readership Survey 2017 (IRS). As per MRUC (the agency which conducts the IRS survey), the 2017 results are not comparable with previous readership surveys since definition of AIR has undergone changes. As a result, we analyze the relative positioning of newspapers in this survey and the previous one (we consider IRS 2012 survey as it was the one free of any controversies) to conclude which brands are gaining importance and vice versa.

Key Findings (on AIR basis):

• ‘Dainik Jagran’ continues to be the most read newspaper in India. At an all India level, ‘Hindustan’ has improved its ranking to two (from No 3 in IRS 2012) while ‘Dainik Bhaskar’ has slipped to No 3.
• ‘Times of India’ is the largest read English language newspaper; however, it is now India’s eleventh most read newspaper, down from being No 7 in IRS 2012. ‘Hindustan Times’ is the second most read English newspaper in India and maintains its all India rank at No 18.
• ‘Dainik Jagran’ has become Urban India’s most read newspaper whereas ‘Dainik Bhaskar’ has slipped to No 2 (versus being at the top in IRS 2012 survey).
• ‘Dainik Bhaskar’ has lost AIR market-share (amongst the Top 5 newspapers) across all its important legacy markets (Madhya Pradesh & Chattisggarh, Gujarat, Rajasthan).
• ‘Dainik Jagran’ lost AIR market-share (amongst top 5 newspapers) in its key market of Uttar Pradesh; however, was able to maintain it in Bihar and improve in the smaller market of Jharkhand.
• ‘Hindustan’ improved its AIR market-share (amongst top 5 newspapers) in the large market of Uttar Pradesh, whereas it lost AIR market-share in Bihar & Jharkhand.
• ‘Hindustan Times’ improved its relative positioning vis-à-vis ‘Times of India’ across both its most important markets of New Delhi and Mumbai. While the MRUC has clearly stated not to compare this survey with the previous ones, it is hard to miss the sharply lower AIR for both in New Delhi.

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We note that for the listed players only 35-40% of their advertising is dependent on IRS as only national advertisers use the IRS as a currency and the local advertisers (60-65% of overall ad spends) continue to use brands based on response, circulation numbers and perception.

Jagran Prakashan (JAGP), through its flagship brand ‘Dainik Jagran’, has improved its absolute readership in its key states of Uttar Pradesh, Bihar, and Jharkhand in IRS 2017 (versus IRS 2012) but on a relative basis (measured as market-share amongst top 5), the brand has slipped to some extent in 2017 (vs 2012) in UP. We maintain our Neutral stance on JAGP given muted near-term ad revenue growth outlook.

HT Media’s (HTML) Hindi daily ‘Hindustan’ has registered admirable growth across its focus markets of UP (especially in terms of market-share). Its English daily ‘Hindustan Times’ has also improved vis-à-vis its key competitor ‘The Times of India’ in its key markets of Mumbai and Delhi, but absolute readership numbers of English dailies are sharply down versus IRS 2012 (we note that MRUC has advised against comparing this survey with the previous ones). Our Outperformer rating on HT Media is driven by the cost cutting initiatives that the company put in motion earlier during the fiscal even as we remain structurally negative on English Print over the long term.

The key surprise from IRS 2017 was the deterioration of ‘Dainik Bhaskar’, the flagship brand of DB Corp (DBCL), in terms of market-share across its key markets. While the daily has maintained its ranking in Madhya Pradesh, and Rajasthan (albeit with lower market-share amongst the Top 5 dailies), it has dropped down from its top position in Chattisgarh to second. Its Gujarati daily ‘Divya Bhaskar’ too has slipped from 2nd position in 2012 to 3rd in 2017. Across Urban India too, Dainik Bhaskar has fallen from top spot in 2012 to second in 2017. We believe that our growth assumptions for DBCL’s print business are not at risk because of IRS 2017 trends as ad spends are on a recovery path and a heavy election calendar for the company’s core geographies in 2018/19 as well as the national election in 2019 would also help. However, to account for the weakening relative positioning of its flagship brand, we cut our target multiple of DBCL to 14x (from 15x) even as we maintain our OP (with a revised PT of Rs364 from Rs390) as we believe the current stock price factors in most of the negatives and the risk reward is favourable. We also note that DBCL has started investing heavily in increasing circulation which could have a positive bearing on future IRS findings.