MOSL: JAGRAN PRAKASHAN (Buy)-Print ad market yet to recover

​Jagran Prakashan: Print ad market yet to recover

(JAGP IN, Mkt Cap USD0.9b, CMP INR173, TP INR225, 30% Upside, Buy)

• PAT down 19% YoY on weak revenue growth, higher cost: Consol. revenue increased 2% YoY to INR5.7b (4% miss) in 2QFY18. Consol. EBITDA declined 9.4% YoY (15% miss), with the margin contracting 310bp YoY to 24.5% due to higher employee/other expenses. Advertising revenue increased marginally by 1% YoY (in-line) to INR3.5b, while circulation revenue was flat YoY at INR1.1b. PAT declined 19% YoY to INR695m due to a 10% increase in D&A, partly cushioned by lower interest cost and higher other income.
  
• Dainik Jagran drags overall growth: A look at the business-wise performance indicates a 10% YoY decline in Dainik Jagran EBITDA due to flat revenues and 310bp margin contraction. Other Publication’s revenue grew 5% YoY, with EBITDA improvement of 140% YoY on a low base. Radio revenue increased 10% YoY to INR758m due to one-offs, with EBITDA down 16% YoY. Management highlighted that revenue growth was impacted by muted Retail and Government ads.
  
• Outlook remains weak; expect FY18 revenue/PAT growth of 4%/6%: Management indicated that the outlook for Government and Retail (combined contribution of 50%+ of revenues) ad revenue remains weak due to continued GST-related hiccups. A recovery in national ad spend offers some comfort, though. Nevertheless, we cut FY18E revenue/EBITDA for JAGP by 3%/7% due a weak 2QFY18 performance and a subdued outlook, building in FY18E revenue/PAT growth at 4%/6%. Thereafter, FY19E could be better, with revenue/PAT growth of 10%/19%.