MOSL: JAGRAN PRAKASHAN (Buy)- EBITDA takes a good turn; higher newsprint prices to limit growth

Jagran Prakashan: EBITDA takes a good turn; higher newsprint prices to limit growth

(JAGP IN, Mkt Cap USD0.5b, CMP INR121, TP INR156, 29% Upside, Buy)

• EBITDA begins uptrend: revenue grew 2% YoY (+10% QoQ) to INR6b (in-line), driven by radio and other operating revenue; print business revenue was flat YoY. Newsprint prices increased 10% YoY; however, a 4-5% decline in circulation copies and the use of old (low-priced) inventory restricted the rise in newsprint cost to a meager 3% YoY (+10% QoQ). EBITDA, thus, grew 1% YoY (+36% QoQ) to INR1.6b (in-line), with the margin down 15bp YoY to 27.1%. PAT declined 1% YoY (+45% QoQ) to INR854m (in-line) due to lower other income.
• Print business finds support: Print ad revenue was flat YoY at INR3.6b, led by an improvement in ad spends across FMCG, education and e-commerce categories. Circulation revenue grew 1% YoY to INR1.1b, driven by a 9-10% rise in cover price (not fully factored), partly offset by a decline in circulation copies. On the business front, Dainik Jagran’s EBITDA was up 1% YoY, while other publications reported a sharp 55% YoY drop in EBITDA. Radio business EBITDA grew 18% YoY.
• Concall highlights: (1) 9%/10% YoY increase in Dainik Jagran/Nai Dunia’s cover price led to a 4-5% drop in circulation copies. (2) Expect 8% print ad revenue growth for FY19; 4-5% circulation revenue growth. (3) Incremental newsprint price impact of 12-13% expected in 2QFY19. (4) Expect digital business to turn EBITDA-positive by 4QFY19. (5) FY19 capex guidance stands at INR500-600m.