For 2QFY2016, Jagran Prakashan (JPL)’s consolidated top-line grew by 19% yoy,
mainly due to strong growth in the advertisement segment. The acquisition of the
Radio City business in 1QFY2016 added to the advertising revenue. However,
circulation revenue showed lower growth during the quarter. The company
reported strong profitability on a consolidated basis due to falling news print costs
and with contribution from Radio City.
Ad revenue up ~27% yoy, Circulation revenue up ~4% yoy: The company’s
advertising revenue growth for the quarter was healthy at ~27% yoy to ~Rs520cr,
primarily driven by increase in print revenue and radio advertisement revenue.
Circulation revenue was up 4% yoy to Rs100cr due to increase in cover prices.
However, income from other businesses declined by ~7% yoy to ~Rs31cr.
Consequently, the consolidated top-line grew by ~19% yoy to~ Rs520cr.
OPM improves: The consolidated operating profit grew by ~38% yoy to Rs147cr
and the OPM expanded by 393bp yoy to 28.2% owing to lower raw material
cost. This led to a strong reported net profit growth of ~61% yoy to Rs91cr (including
profits from the radio business).
Outlook and valuation: Considering Dainik Jagran’s status as the most read
Hindi newspaper in the country and its strong presence in the rapidly growing
Hindi markets of Bihar, Haryana, Jharkhand, Punjab, Madhya Pradesh and Uttar
Pradesh, we expect JPL to benefit the most from an eventual recovery in the Indian
economy. Further, the acquisition of Radio City is also expected to boost the
company’s profitability, going ahead. Hence, we maintain our Buy rating on the stock
with a target price of Rs169.

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