Stock Fundamentals

DB Corp: Buy

K Venkatasubramanian | Updated on March 12, 2018

Well positioned: Over two-thirds of the company’s ad revenue comes from resilient local or retail advertisers.

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A dominant presence in the language print media makes it a good bet on State elections



As a play on the potential revival in the domestic economy, DB Corp is attractively positioned to take advantage of its entrenched presence in northern and western India. Dainik Bhaskar, the company’s main publication, has been able to benefit from the rapid growth in tier-2 cities and towns, mostly in the Hindi-speaking States.

Investors with a two-year horizon can buy the shares of the company, given the consistent growth in its circulation revenues and steady improvements in advertising income. At ₹317, the share trades at 16 times its estimated per share earnings for 2014–15, which is lower than the valuation the company has historically traded at — 18-19 times. This presents an attractive entry point for investors.

From our last recommendation at ₹302 six months ago, the stock has barely moved. Concerns over a delayed monsoon affecting rural demand and advertising meant that the stock was not in favour. But DB Corp has still been able to tap the right segments to grow its advertising revenues.

Ads to its advantage

A steady improvement in the share of resilient regional advertising, and leadership in circulation and readership in key markets are positives for the company. Over the next 12-15 months, elections to be held in many States, such as Maharashtra, Haryana, Jharkhand and later in Bihar, could provide the company advertisements from political parties.

In 2013-14, DB Corp’s revenue increased 16.7 per cent over 2012-13 to ₹1,884 crore, while its net profit expanded 40.6 per cent to ₹307 crore.

The company’s operating (EBITDA) margin of nearly 28 per cent is among the highest in the print as well as the electronic media. Though newsprint costs did go up, DB Corp was able to maintain a tight leash on employee costs, thus protecting margins.

Dominant presence

DB Corp publishes several newspapers, the main being Dainik Bhaskar which is circulated in 14 States. It also publishes a Gujarati newspaper in Gujarat, a Marathi daily in Maharashtra, as well as a Hindi business daily in six States.

The total readership for all its newspapers is said to be 19.8 million. Dainik Bhaskar is among the most read newspapers in large States, such as Madhya Pradesh, Rajasthan, Punjab and Haryana. In Gujarat too, its regional language newspaper is among the most read. DB Corp is likely to benefit from increased advertising spends by telecom and consumer durables companies in smaller towns and cities. The company has also been able to take price increases and yet protect its circulation in key States such as Madhya Pradesh.

Healthy mix

DB Corp derives around 75 per cent of its revenue from advertising and 17 per cent through circulation. The rest of the revenue comes from the radio division and OOH (out of home) operations. Its radio division has become profitable recently.

Though the auto and BFSI segments have felt the heat of delayed monsoons, resulting in curtailed ad spends, DB Corp has been able to make up reasonably for this by getting into growing segments, such as FMCG and healthcare, where it has seen significant traction.

The company gets over two-thirds of its advertising revenue from local or retail advertisers. This segment is generally quite resilient to macroeconomic indicators. The company has also been able to grow its national advertising footprint. DB Corp’s advertising revenue grew 17.4 per cent in 2013-14. It has also been able to hike advertisement rates in the past year and only moderate discounts have been offered to advertisers. The company’s circulation revenue has been growing in double-digits at 14.6 per cent in FY14.

Pricing pressure from competition on advertisement rates or cover price can impact the company’s margins.

Published on August 24, 2014

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