MOSL: JAGRAN PRAKASHAN (Buy)-Revenue growth at the cusp of revival- Print business valued attractively

Jagran Prakashan: Revenue growth at the cusp of revival; Print business valued attractively at 11x FY19E EPS

(JAGP IN, Mkt Cap USD0.9b, CMP INR159, TP INR215, 35% Upside, Buy)

• Ad revenue is likely to grow at a CAGR of 10% over FY18-20 (FICCI estimates vernacular print ad market growth of 8-9%), led by (a) revival in ad spends, (b) better monetization of IRS data, (c) favorable base, and (d) high ad spends in the run-up to the general elections.
• Increased circulation of Naidunia and other publications coupled with yield improvement should help garner 7% circulation revenue CAGR over FY18-20.
• MBL, the radio business, should post 16% revenue CAGR and 29% EBITDA CAGR over FY18-20, led by higher utilization and yield improvement.
• We expect 10% CAGR in consolidated revenue and 17% CAGR in consolidated EBITDA FY18-20, with the impact of GST/demonetization waning and a favorable base.
• Excluding MBL’s current value, JAGP is trading at an EV/EBITDA of 6x (FY19E), and at 11x FY19E EPS. We value JAGP at 14x December 2019E EPS (~10% discount to 3-year average), arriving at a TP of INR215.

 Growth levers lined up for resurgence in ad revenue

As the impact of GST-related hiccups is waning, print ad revenues are expected to grow at a healthy 10% CAGR over FY18-20, on the back of recovery in ad spends led by increased launches across the FMCG and auto space. JAGP should further gain due to its leadership in recent IRS ratings, which should help command higher ad rates. Besides, higher government and political ad spends in FY19 – pre-election year of 2019 general elections and low base bodes well.