MOSL: JAGRAN PRAKASHAN (Buy)-Print business disappoints-Reversal of newsprint prices to revive earnings
Jagran Prakashan: Print business disappoints; Reversal of newsprint prices to revive earnings
(JAGP IN, Mkt Cap USD0.4b, CMP INR102, TP INR140, 38% Upside, Buy)
- High RM costs continue to drag: Consol. revenue grew a meager 3% YoY (+11% QoQ) to INR6.1b (in-line), primarily due to weak print revenues. Yet, consol. EBITDA at INR1.3b, witnessed a steep 19% YoY decline (9% miss, mainly due to miss on revenue) impacted by 15% YoY increase in RM cost. Consequently, margin contracted 560bp YoY to 21.6%. PAT at INR666m, down 22% YoY (+58% QoQ, 15% miss), was dragged by the EBITDA decline, partly offset by higher other income. For 9MFY19, revenue/EBITDA/PAT grew 1%/-14%/-19% YoY.
- Concall highlights: (1) FY20 ad growth should range between 7-8%, (2) FY20 circulation revenue should witness full impact of the cover price increase, and (3) Expect 10-11% decline in FY20 newsprint cost as benefits from 10-20% drop in newsprint price will be partly offset by 3-4% increase in circulation copies.
- EBITDA growth at the cusp of revival: We largely maintain our estimates; expect consol. revenue to grow at 8% CAGR over FY19-21 on the back of (1) 7% ad revenue growth driven by election-led higher ad spends, increase in DAVP rates and recovery in local ad spends, (2) modest 5% uptick in circulation revenue on cover price increase, and (3) healthy 14% growth in radio revenue. Muted 3QFY19 performance leads us to cut our FY19 EBITDA est. by ~7%. Further 10-20% decline in newsprint prices (as hinted by management), which is partly offset by increase in circulation copies should drive healthy 22% EBITDA CAGR
Jagran Prakashan Limited is a media and communications company with interests in print, digital, radio, out-of-home (OOH) and activation. The Company is engaged in the business of printing and publication of newspapers and periodicals, business of radio broadcast and all other related activities through its radio channels operating under brand name Radio City 91.1 frequency modulation (FM) in India. It is also engaged in the business of providing event management services and outdoor activities. The Company publishes approximately 12 print titles in over five different languages spread across 15 states with over 100 editions. The Company's print media brands include Dainik Jagran, inext, mid-day, Nai Dunia, mid-day Gujarati, Inquilab, Sakhi, Punjabi Jagran and Jagran Josh. The Company's digital media brands include Jagran New Media, Jagran.com, Jagranjosh.com, Jagran Post, Jagran Junction and Jeetle. The Company's social initiative brand include Jagran Pehel.
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