Stock Fundamentals

Jagran Prakashan: Buy

K Venkatasubramanian | Updated on November 02, 2014

Well positioned: Resilient local ads make up the chunk of the company's revenue   -  BUSINESS LINE

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The company is making the most of the good run in the Hindi print media



Jagran Prakashan, the publisher of Hindi Daily Dainik Jagran, looks set to benefit from the expansion in regional language newspaper readership and increased traction in advertising in the fast-growing smaller towns and cities of North India.

The company also publishes an English daily Midday and other regional newspapers such as Nai Dunia and Punjabi Jagran.

Resilient local advertising, increased realisation in key geographies and renewed thrust on rural areas by companies in the auto, consumer durables and telecom sectors suggest buoyancy in advertising revenues for the company. Key segments such as FMCG, real estate and education are also expected to drive growth.



Why buy

Steady improvement in ad revenues

Healthy increase in circulation

Presence in key growth markets



At ₹129, the Jagran Prakashan stock trades at 15 times estimated per share earnings for 2014-15. This is at a discount to peers such as DB Corp and Hindustan Media Ventures, which trade at multiples of 17-18 times. Investors with a one-to-two year horizon can buy the stock.

From a business perspective, Hindi newspapers have been able to raise advertising rates faster than their English counterparts, thereby reducing the premium gap enjoyed by the latter.

This could drive up realisations for regional language newspapers such as Dainik Jagran. In the first half of 2014-15, the company's revenue rose 6.5 per cent to ₹876.5 crore over the same period last year, while net profit increased 8.1 per cent to ₹ 111.7 crore.

The profit growth would have been much better, but for higher taxes paid in the current fiscal compared with last year.

Presence in key markets

Jagran Prakashan has presence in 15 States and publishes papers in five languages. Dainik Jagran has consistently topped the charts in terms of readership among the Hindi language newspapers.

Advertising accounts for nearly 70 per cent of Jagran's revenues, while circulation chips in with over 20 per cent. Other avenues such as radio and out-of-home advertising make up the rest.

With 60 per cent of its advertising coming from local players, the company is less affected by trends in national advertising, which hinge on economic prospects.

The company has benefited from advertising spends in the Lok Sabha polls as well as in the recent State elections. With polls slated in Jammu and Kashmir and Jharkhand this year, and in some States, mainly Bihar, next year, Jagran should gain from increased ad spends by candidates.

Jagran acquired Nai Dunia, a Madhya Pradesh-based Hindi newspaper with significant circulation a couple of years back. This has augmented its presence in that State and allowed it to take on peers such as Dainik Bhaskar that have a stronghold in that region.

Dainik Jagran’s advertising revenues have started to grow at 10-12 per cent, faster than the overall company’s rate in recent quarters. Revenues from circulation are growing at just shy of double-digits.

With many sectors such as telecom increasingly getting a major share of new subscribers from smaller cities and towns, it is likely to spur ad spends, thus benefitting players such as Dainik Jagran.

The company has also been able to take cover price increases.

A recent report from FICCI-KPMG indicates that in the share of business by languages, Hindi print’s presence is likely to increase from 31 per cent in 2013 to 36 per cent by 2018. The English print market, on the other hand, is set to fall sharply from 38 per cent to 30 per cent. Advertising revenues for the Hindi newspaper space too is set to grow at a healthy pace.

Clearly, Hindi newspapers and key players such as Dainik Jagran appear well placed to take advantage of these favourable factors.

Risks

Any major undercutting of cover prices due to competition from players such as Dainik Bhaskar, Hindustan and Amar Ujala could dent Jagran’s revenue on the circulation front.

Published on November 01, 2014

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