db corp result updated
TRANSCRIPT
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Please refer to important disclosures at the end of this report 1
(` cr) 4QFY12 4QFY11 % yoy 3QFY12 % qoqRevenue 361 317 13.6 396 (8.8)EBITDA 76 80 (4.8) 102 (25.6)
OPM (%) 21.0 25.1 (407)bp 25.7 (472)bp
PAT 45 45 0.9 56 (18.7)Source: Company, Angel Research
DB Corp. (DBCL) reported weak performance on the earnings front, primarily due
to sharp fall in operating margins despite moderate performance on the top-line
front. Operating margins fell rather steeply during the quarter on account of
pre-operative expenses for the new edition launched in Sholapur, operating losses
on recent editions launched in Maharashtra and Jharkhand and impact of rupee
depreciation on newsprint costs. Consequently, companys earning remained flat
on a yoy basis. We maintain our Buy recommendation on the stock.Key highlights for the quarter: For 4QFY2012, the companys top line grew by13.6% yoy to `361cr aided by moderate 5.4% yoy growth in ad revenue to
`263cr and healthy 16.2% yoy growth in circulation revenues on account of new
launches and selective increase in cover prices. Operating margin fell by 407bp
yoy (472bp qoq) on account of pre-operative expense on account of Sholapur
launch and operating losses on the new editions launched in Maharashtra and
Jharkhand. Radio business turned PAT positive and registered EBIDTA of `5.2crduring the year. The company reported flat yoy growth in adjusted profit to`45cr
due to aggressive launches during the year.
Outlook and valuation: At the CMP, DBCL is trading at 12.6x FY2014Econsolidated EPS of`16.1. We maintain our Buy view on the stock with a revisedtarget price of `269, based on 17x FY2014E EPS, benchmarking it to our printmedia sector valuations (which are at ~15% premium to our sensex target
valuation multiple). Downside risks to our estimates include 1) any further rise in
newsprint prices, 2) competition becoming fierce and 3) higher-than-expected
losses/increase in the breakeven period of the new launches.
Key financials (Consolidated)Y/E March (` cr) FY2011 FY2012E FY2013E FY2014ENet sales 1,265 1,463 1,652 1,863% chg 20.4 15.7 12.9 12.7
Net profit (Adj.) 259 202 247 295% chg 41.5 (22.0) 22.5 19.2
EBITDA margin (%) 31.9 24.2 25.7 26.3
EPS (`) 14.1 11.0 13.5 16.1P/E (x) 14.3 18.4 15.0 12.6
P/BV (x) 4.5 3.9 3.3 2.8
RoE (%) 35.1 22.6 23.8 24.2
RoCE (%) 33.7 25.9 28.3 30.1
EV/Sales (x) 3.1 2.7 2.2 1.8
EV/EBITDA (x) 9.4 10.5 8.4 7.0
Source: Company, Angel Research
BUYCMP `202
Target Price `269
Investment Period 12 Months
Stock Info
Sector
Bloomberg Code
Shareholding Pattern (%)
Promoters 86.4
MF / Banks / Indian Fls 4.7
FII / NRIs / OCBs 4.9
Indian Public / Others 4.0
Abs. (%) 3m 1yr 3yr
Sensex (7.5) (11.3) 38.2
DBCL (1.0) (16.8) -
Media
Market Cap (` cr) 3,931
Beta 0.4
52 Week High / Low 258/170
Avg. Daily Volume 9,796
Face Value (`) 10
BSE Sensex 16,420
Nifty 4,966
Reuters Code DBCL.BO
DBCL@IN
Amit Patil022-39357800 Ext: 6503
DB CorpPerformance Highlights
4QFY2012 Result Update | Media
May 10, 2012
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Exhibit 1:Quarterly PerformanceY/E March (` cr) 4QFY12 4QFY11 % yoy 3QFY12 % qoq FY2012 FY2011 % chgNet Sales 361 317 13.6 396 (8.8) 1,464 1,265 15.7Consumption of RM 130 104 24.9 135 (3.6) 508 383 32.5(% of Sales) 36.1 32.8 34.1 34.7 30.3
Operating Expense 94 84 11.0 96 (2.0) 358 294 21.8
(% of Sales) 26.0 26.6 24.2 24.4 23.2
Staff Costs 61 49 24.0 63 (3.3) 243 185 31.6
(% of Sales) 16.9 15.5 15.9 16.6 14.6
SG&A Expense - - - - -
(% of Sales) - - - - -
Total Expenditure 285 238 19.8 294 (3.0) 1,109 862 28.7Operating Profit 76 80 (4.8) 102 (25.6) 355 404 (12.0)OPM (%) 21.0 25.1 25.7 24.3 31.9
Interest (2) 3 (155.9) 8 (123.7) 16 15 1.5
Depreciation 13 11 17.0 13 (3.1) 51 43 16.8
Other Income 3 4 (5.4) 2 38.8 12 14 (18.7)
PBT (excl. Ext Items) 68 69 (0.9) 83 (17.7) 300 359 (16.4)Ext Income/(Expense) - - - - -
PBT (incl. Ext Items) 68 69 83 300 359(% of Sales) 18.9 21.6 20.9 20.5 28.4
Provision for Taxation 23 24 (2.9) 27 (15.7) 98 100 (1.8)
(% of PBT) 33.6 34.3 32.8 32.7 27.8
Recurring PAT 45 45 0.2 56 (18.7) 202 259 (22.0)PATM 13 14 14 14 20
Minority Interest 0 (0) (240.7) 0 (27.5) (0) (0) (39.8)
Reported PAT 45 45 0.9 56 (18.7) 202 259 (22.0)Equity shares (cr) 18.3 18.3 18.3 18.3 18.3
FDEPS (`) 2.5 2.5 0.9 3.0 (18.7) 11.0 14.1 (22.0)
Source: Company, Angel Research
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Moderate top-line growth at 13.6% yoy
DBCL reported moderate top-line growth of 13.6% yoy to `361cr in the current
quarter, driven by 5.4% yoy growth in ad revenue and 16% yoy growth in
circulation revenue primarily aided by increased circulation due to new launches in
Jharkhand and Maharashtra.
During the quarter, DBCL maintained its strong foothold in Madhya Pradesh,
Chandigarh, Punjab, Rajasthan, Haryana and Chhattisgarh. Among the other
segments, the companys radio business reported steady growth of 9.4% yoy in
revenues to`15cr.
Exhibit 2:Top-line continues double digit growth
Source: Company, Angel Research
Advertising Revenue aided by retail advertising
Advertising revenue registered 5.4% yoy growth and stood at `263cr for the
quarter mainly on account of increase in local advertising but decline in national
advertising pulled down the advertising revenues. Maharashtra and Jharkhand
have started getting local advertisements but it will take some time before they get
national advertisements since readership data for these states is yet to come in.
Circulation Revenue continue double digit growth
Circulation revenue continued to grow by double-digits. It stood at`62cr, a 16%
rise yoy basis due to DBCLs continued strong foothold in Madhya Pradesh,
Chandigarh, Punjab, Rajasthan, Haryana and Chhattisgarh along with recent
launches in Maharashtra and Jharkhand.
257
299 301
348 361 354 354
396361
-
5.0
10.0
15.0
20.0
25.0
-
50
100
150
200
250
300
350
400
450
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
(%)
(`cr)
Top line (LHS) yoy growth (RHS)
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Exhibit 3:Advertising Revenue
Source: Company, Angel Research
Exhibit 4:New launches inch up circulation revenue
Source: Company, Angel Research
OPM under pressure yoy on high start-up costs, newsprint prices
and forex losses
At the operating level, DBCL faced margin pressure (margin contracted by 407bp
yoy) on account of increased circulation volumes due to new edition launches and
increased staff cost by 142bp yoy/97bp qoq due to higher number of employees
because of new editions. Radio business reported EBIDTA of`5.2crfor the quarter.
The company also incurred pre-operative expense on Sholapur launch and higher
newsprint prices due to rupee depreciation.
Exhibit 5:OPMs contracts by 407bp yoy
Source: Company, Angel Research
Exhibit 6:Adjusted PAT ends up flat
Source: Company, Angel Research
Adjusted PAT flat due to aggressive launches
In terms of Profits, DBCL posted flat Adjusted PAT. It was primarily due to losses
because of new edition launches and pre-operative expenses. The company
reported a 23% qoq decline in its Adjusted PAT. Radio business achieved PAT of
`2.5 cr which acted as a small boost in Q4 profits. For 4QFY2012, Adjusted PAT
stood at`45cr.
191
236 236
269
250
283 274287
263
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
-
50
100
150
200
250
300
350
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
(%)
(`cr)
Advertising revenue (LHS) yoy growth (RHS)
5354 53
54 53
57
60
6362
(2.0)
-
2.0
4.0
6.0
8.0
10.0
12.014.0
16.0
18.0
46
48
50
52
54
56
5860
62
64
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
(%)
(`cr)
Circulation revenue (LHS) yoy growth (RHS)
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
(%)
Gross margins OPM
35
72
64
78
45
61
40
56
45
-
5.0
10.0
15.0
20.0
25.0
30.0
-
10
20
30
40
50
60
70
80
90
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
(%)
(`cr)
Recurring PAT (LHS) NPM (RHS)
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Investment rationale
Well-planned aggression in business edges DBCL over peers: DBCL, though adominant No. 2 player in the overall regional print space (trailing behind
Jagran Prakashan), enjoys a premium valuation to its peers Jagran Prakashan
(flagship daily Dainik Jagran) and Hindustan Media Ventures (flagship daily
Hindustan). We attribute the reason for this trend to DBCLs business model
(which is primarily driven by ad revenue) and well thought-out launches in new
markets. We believe the companys continuous endeavor to diversify its print
business coupled with aggressive expansion into new markets (urban towns
beyond metros) backed by exhaustive market research and focus on achieving
leadership is the key differentiating factor compared to its peers. The company
has been successful in executing its expansion plans with launches in
Maharashtra and Jharkhand.
Outlook and valuation
At the CMP, DBCL is trading at 12.6x FY2014E consolidated EPS of `16.1. Wemaintain our Buy view on the stock with a revised target price of `269, based on17x FY2014E EPS, benchmarking it to our print media sector valuations (which are
at ~15% premium to our sensex target valuation multiple). Downside risks to our
estimates include 1) any further rise in newsprint prices, 2) competition becoming
fierce and 3) higher-than-expected losses/increase in the breakeven period of the
new launches.
Exhibit 7:Change in estimatesOld estimates New estimates % chg
(` cr) FY2013E FY2014E FY2013E FY2014E FY2013E FY2014ERevenue 1,656 1,869 1,652 1,863 - -OPM (%) 26 26.8 25.7 26.3 (30bp) (50bp)
EPS (`) 14 16.1 13.5 16.1 (3.7) -Source: Company, Angel Research
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Profit and loss Statement (Consolidated)
Y/E March (` cr) FY2009 FY2010 FY2011 FY2012E FY2013E FY2014EGross sales 949 1,051 1,265 1,463 1,652 1,863Less: Excise duty - - - - - -
Net Sales 949 1,051 1,265 1,463 1,652 1,863
Total operating income 949 1,051 1,265 1,463 1,652 1,863% chg 11.6 10.7 20.4 15.7 12.9 12.7
Total Expenditure 814 720 862 1,109 1,227 1,372Cost of Materials 407 328 384 508 478 538
SG&A Expenses 266 249 284 329 444 501
Personnel 133 132 185 243 289 317
Others 7 12 10 29 16 16
EBITDA 135 331 403 355 425 491% chg (20.8) 144.2 22.0 (12.0) 19.8 15.5
(% of Net Sales) 14.3 31.5 31.9 24.2 25.7 26.3
Depreciation & Amortisation 29 38 43 51 59 59
EBIT 106 293 360 304 365 432% chg (28.5) 175.2 22.9 (15.5) 20.2 18.2
(% of Net Sales) 11.2 27.9 28.4 20.8 22.1 23.2
Interest & other Charges 40 25 15 16 18 19
Other Income 12 12 14 12 21 26
(% of PBT) 15.3 4.4 4.0 3.8 5.8 5.9
Share in profit of Associates - - - - - -
Recurring PBT 78 281 359 300 369 440% chg (41.1) 258.9 27.8 (16.4) 23.0 19.2Prior Period & Extra Exp/(Inc.) 0 0 - - - -
PBT (reported) 78 280 359 300 369 440Tax 42 106 100 98 122 145
(% of PBT) 54.1 37.6 27.9 32.7 33.0 33.0
PAT (reported) 36 175 259 202 247 295Add: Share of earn of assoc - - - - - -
Less: Minority interest (MI) (12) (8) (0.3) (0) (0) -
PAT after MI (reported) 48 183 259 202 247 295ADJ. PAT 48 183 259 202 247 295% chg (37.1) 283.5 41.6 (22.0) 22.5 19.1
(% of Net Sales) 5.0 17.4 20.5 13.8 15.0 15.8
Basic EPS (`) 2.8 10.1 14.1 11.0 13.5 16.1Fully Diluted EPS ( ) 2.6 10.0 14.1 11.0 13.5 16.1% chg (37.3) 283.9 41.7 (22.0) 22.4 19.2
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Balance Sheet (Consolidated)
Y/E March (` cr) FY2009 FY2010 FY2011 FY2012E FY2013E FY2014ESOURCES OF FUNDSEquity Share Capital 169 182 183 183 183 183Share Cap. suspense account - 1 - - - -
Reserves& Surplus 89 466 646 776 921 1,130
Shareholders Funds 258 649 829 959 1,104 1,313Minority Interest 12 4 0 2 0 0
Total Loans 563 321 201 213 164 154
Deferred Tax Liability 39 61 70 75 69 69
Total Liabilities 872 1,035 1,101 1,248 1,338 1,537APPLICATION OF FUNDSNet FA (includes CWIP) 647 647 709 793 801 834Investments 24 21 16 46 46 46
Current Assets 399 561 621 696 803 994
Cash 45 193 173 188 291 413
Loans & Advances 105 103 133 139 139 156
Other 248 266 315 368 373 424
Current liabilities 219 207 255 296 323 348
Net Current Assets 180 354 366 400 479 646Mis. Exp. not written off 22 13 10 9 11 11
Total Assets 872 1,035 1,101 1,248 1,338 1,537
Cash flow
Y/E March (` cr) FY2009 FY2010E FY2011 FY2012E F Y2013E FY2014EProfit before tax 78 281 359 300 369 440
Depreciation 29 38 43 51 59 59
Change in Working Cap. 13 (14) (37) (46) (32) (46)
Interest / Dividend (Net) 30 25 15 16 18 19
Direct taxes paid 36 101 100 98 122 145
Others (16) 2 19 9 31 1
Cash Flow from Operations 98 229 299 232 323 327(Inc.)/ Dec. in Fixed Assets (295) (38) (105) (84) (67) (91)
(Inc.)/ Dec. in Investments (18) 3 4 (30) - -
Cash Flow from Investing (313) (34) (101) (114) (67) (91)Issue of Equity (1) 251 2 - - -
Inc./(Dec.) in loans 219 (242) (120) (12) (49) (10)
Dividend Paid (Incl. Tax) 10 42 85 75 86 86
Interest / Dividend (Net) 29 13 15 16 18 19
Cash Flow from Financing 180 (48) (217) (103) (132) (114)Inc./(Dec.) in Cash (36) 147 (19) 15 103 122
Opening Cash balances 81 45 193 173 188 291Closing Cash balances 45 193 173 188 291 413
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Key Ratios
Y/E March FY2009 FY2010 FY2011 FY2012E FY2013E FY2014EValuation Ratio (x)P/E (on FDEPS) 78.0 20.3 14.3 18.4 15.0 12.6P/CEPS 44.7 16.7 12.3 14.3 12.1 10.5
P/BV 13.3 5.7 4.5 3.9 3.4 2.8
Dividend yield (%) 0.2 1.0 2.0 1.7 2.0 2.0
EV/Sales 4.5 3.7 3.1 2.7 2.2 1.9
EV/EBITDA 31.3 11.6 9.4 10.5 8.4 7.0
EV / Total Assets 4.9 3.7 3.4 3.0 2.7 2.2
Per Share Data (`)EPS (Basic) 2.8 10.1 14.1 11.0 13.5 16.1
EPS (fully diluted) 2.6 10.0 14.1 11.0 13.5 16.1
Cash EPS 4.5 12.2 16.5 14.2 16.7 19.3
DPS 0.5 2.0 4.0 3.5 4.0 4.0
Book Value 15.3 35.7 45.2 52.3 60.3 71.7
Dupont AnalysisEBIT margin 11.2 27.9 29.5 22.2 22.1 23.2
Tax retention ratio 0.5 0.6 0.7 0.7 0.7 0.7
Asset turnover (x) 1.4 1.3 1.4 1.5 1.6 1.7
ROIC (Post-tax) 7.1 21.9 30.0 21.8 23.7 26.7
Cost of Debt (Post Tax) 0.1 0.0 0.0 0.1 0.1 0.1
Leverage (x) 1.5 1.0 0.1 0.0 (0.1) (0.2)
Operating ROE 18.1 44.6 33.4 22.3 22.0 22.1
Returns (%)ROCE 14.2 30.7 33.7 25.9 28.7 30.0
Angel ROIC (Pre-tax) 12.9 34.8 37.4 29.4 34.9 38.4
ROE 20.0 40.3 35.1 22.6 24.1 24.4
Turnover ratios (x)Asset Turnover (Gross Block) 2.3 1.6 1.6 1.6 1.7 1.8
Inventory / Sales (days) 27 25 21 24 26 26
Receivables (days) 68 67 69 65 63 63
Payables (days) 70 59 48 57 56 54
Working capital cycle (ex-cash) (days) 52 56 58 49 48 52
Solvency ratios (x)Net debt to equity 1.9 0.2 0.1 (0.0) (0.1) (0.2)
Net debt to EBITDA 3.7 0.3 0.1 (0.0) (0.3) (0.6)
Interest Coverage (EBIT / Interest) 2.6 11.9 24.0 19.0 20.2 23.4
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Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com
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Disclosure of Interest Statement DB Corp.
1. Analyst ownership of the stock No
2. Angel and its Group companies ownership of the stock No
3. Angel and its Group companies' Directors ownership of the stock No
4. Broking relationship with company covered No
Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to 15%) Sell (< -15%)
Note: We have not considered any Exposure below`
1 lakh for Angel, its Group companies and Directors