MOSL: D B CORP (Buy)-Higher newsprint cost drags earnings-green-shoots visible
D B Corp: Higher newsprint cost drags earnings; green-shoots visible
(DBCL IN, Mkt Cap USD0.5b, CMP INR178, TP INR215, 21% Upside, Buy)
- Higher newsprint cost hurts performance: DBCL continued to see pain due to higher newsprint prices; though the pain was lower-than expected. Consol. revenue grew 10% YoY to INR6.6b (+13% QoQ, 2% beat) led by healthy 11%/3% YoY growth in print ad/circulation revenues and strong 39% YoY growth in radio revenue. This coupled with lower other operating cost helped EBITDA to remain flat YoY (+51% QoQ, 31% beat) at INR1.4b, even as newsprint cost spiraled 34% YoY. Margin contracted 210bp to 21.2%, while PAT fell 3% YoY to INR756m (32% beat). For 9MFY19, revenue/EBITDA/PAT grew 7%/-14%/-18% YoY.
- Concall highlights: (1) Healthy 11% ad growth in 3QFY19 was driven by 2% election related advertisement while rest was due to a favorable festive season. (2) In FY20, ad growth should be better due to high contribution from election ads as well as due to the government rate hike. (3) Against the peak of USD750/ton, newsprint prices are down to USD560-565/ton and are likely to decline further due to capacity addition globally — in Russia and China; we expect 23-24% fall in prices but the benefit will be seen from 1QFY20.
- Green-shoots visible: Marred by higher newsprint prices in the past two quarters, newsprint prices have reversed with >20% fall and are expected to correct further. Further, 25% increase in the government ad rates coupled with an uptick from the general election driven spending should drive growth. Consequently, we maintain our estimates; expect 7%/22% revenue/EBITDA CAGR over FY19-21
DB Corp Limited. D. B. Corp Limited is a print media company, which is engaged in the sale of newspapers and magazines, and advertisement revenue. The Company also has a presence in radio and digital sectors. Its segments include Printing/Publishing, Radio, Event, Internet and Power. Its Printing/Publishing segment includes newspaper, magazines and printing job work. Its Radio segment includes broadcasting of radio. Its Event segment includes event management. Its Internet segment includes integrated Internet and mobile interactive services. Its brands in publishing business include Dainik Bhaskar (Hindi daily), Divya Bhaskar and Saurashtra Samachar (Gujarati dailies), Divya Marathi (Marathi daily), DNA and DB Post (English dailies), and monthly magazines, such as Aha Zindagi and Bal Bhaskar. Its Internet business includes the Websites of Dainik Bhaskar, Divya Bhaskar and Divya Marathi having newspapers in e-paper category and dainikbhaskar.com, divyabhaskar.com, dailybhaskar.com and divyamarathi.com.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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