Stock Fundamentals

Jagran Prakashan: Buy

K. Venkatasubramanian | Updated on June 04, 2011

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Stocks that ride on domestic consumption have witnessed a significant run-up in recent weeks. This makes it a good reason for investors with a two-year horizon to consider buying the shares of Jagran Prakashan, language newspaper publisher.

The publisher of Dainik Jagran has seen sound growth in its advertising revenues and has a strong regional focus. At Rs 127, the share trades at 16 times its estimated per share earnings for FY12. This is at a discount to print players such as Hindustan Media Ventures and HT Media.

In FY11, the company saw its revenues increase by 17.5 per cent to Rs 1,090 crore, while net profits expanded 17 per cent to Rs 205.8 crore, without reckoning Mid-day Multimedia's print business, which Jagran Prakashan acquired in May 2010. In FY11, Jagran Prakashan's revenues from advertising have shown an over 20 per cent growth, due to increased focus on colour ads. Its circulation revenues though grew at 7.1 per cent as it faced competition from Dainik Bhaskar and Hindustan in the Hindi speaking States.

A fair degree of momentum in advertising volumes witnessed in sectors such as education, financial services, real estate apart from banking and insurance aided growth. As companies increase their focus on Tier-2 and Tier-3 towns and cities where consumption upswing is expected, volumes are expected to expand significantly on this front, as Jagran Prakashan seeks to leverage its top readership position in Hindi.

Jagran can also hope to improve its ad revenues from a further increase in ad rates for language newspapers. The advertising rate premia for English newspapers vis-à-vis Hindi and other languages is reducing. A recent FICCI-KPMG report states that advertising premium has contracted from 10x in 2007-09 to 8x currently. The report also states that Hindi print advertising is expected to grow at 15 per cent annually till 2015 (to Rs 7,300 crore), a clear 5 percentage points more than English print advertising market's growth rate.

The print business of Mid-day Multimedia that includes Mid-Day, Sunday Mid-Day and Gujarati Mid-Day newspapers will allow Jagran to focus on lucrative markets such as Mumbai, Bangalore and Pune. This would enable improvement in realisations as these editions garner more colour ads. The company's newsprint consumption costs have gone up by over 20 per cent in FY11. It envisages another 10 per cent increase in the cost of raw materials consumed as it seeks to make new launches of Urdu newspapers in a few of the States where it operates.

Published on June 04, 2011

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