5 December 2017
Update
| Sector:
Media
BSE SENSEX
32,870
S&P CNX
10,128
D B Corp
Buy
CMP: INR362
TP: INR430(+19%)
Focus on circulation ramp-up to continue
We recently hosted DB Corp’s management at our ‘Midcap Conference’.
Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
Avg Val, INRm
Free float (%)
DBCL IN
184
395/345
-1/-7/-26
66.5
1.0
134.4
30.2
Ad growth was impacted in October 2017 due to the shift in the festive season to the
previous quarter. However, the ad growth outlook for November appears better due
to a low base of last year (was impacted by demonetization).
Management plans to expand to additional 27 districts of Bihar and also increase
circulation across other legacy markets. Management targets to take total copies to
6m by March 2018 from 5.6m in October 2017. Also, yield improvement taken in the
legacy markets is expected to support growth in 2HFY18 (11% CAGR over FY12-17).
We expect ad/circulation revenue CAGR of 7%/9% over FY17-20, led by an improving
ad market and an increase in the number of circulation copies at healthy pricing.
State elections in its legacy markets next year and the general election in 2019 should
support growth. We expect EBITDA/PAT CAGR of 9%/14% over FY17-20E.
Financials Snapshot (INR b)
Y/E Mar
2017 2018E 2019E
Net Sales
22.6
24.2
26.1
EBITDA
6.4
6.9
7.5
PAT
3.7
4.0
4.7
EPS (INR)
20.0
21.7
25.4
Gr. (%)
26.0
8.6
16.8
BV/Sh (INR)
86.7 103.8 124.4
RoE (%)
24.6
22.8
22.2
RoCE (%)
23.7
22.3
21.7
P/E (x)
18.1
16.6
14.2
P/BV (x)
4.2
3.5
2.9
Shareholding pattern (%)
As On
Sept-17 Jun-17 Sept-16
Promoter
69.9
69.9
69.9
DII
7.4
7.1
7
FII
15.6
15.8
18.6
Others
7.2
7.3
4.5
FII Includes depository receipts
Stock Performance (1-year)
D B Corp
Sensex - Rebased
480
430
380
330
Ad revenue to grow at 8% in FY18
Ad growth was impacted in October 2017 due to the shift in the festive season to
the previous quarter. Although November appears upbeat due to a low base, the
changes in the GST rates and compliance norms should continue impacting ad
revenue for the company. Sector-wise, the contribution from real estate (earlier 8-
9% of ad revenues; now ~4%), two-wheelers and government continues to
disappoint; however, four-wheelers, durables, lifestyle and education are showing
some recovery. Encouragingly, management expects the education sector
contribution (13-14% of ad revenue) to pick up from 4QFY18. Overall, we expect
11%/8% growth in 3QFY18/FY18.
Expanding reach in Bihar – a positive
DBCL forayed into the Bihar market in 2014 with 11 (of 38) districts at a cover price
of ~INR3. Currently, the market share in Bihar is very miniscule, but the company
expects to expand its reach to the remaining 27 districts in the next few months.
Out of total Bihar ad revenue market, government’s share is ~40-45%. Also, within
a period of one year, DBCL should get empanelled on the board of government
advertising, earning a large pie of the ad market. Besides, national (30-35% share)
and local players are also likely to increase their ad budgets with DBCL in Bihar.
Historically, the company has witnessed breakeven at ~25% revenue market share
(taking ~4 years) in circulation, and a similar trend is expected to be seen in Bihar
as well.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Aliasgar Shakir – Research Analyst
(Aliasgar.Shakir@motilaloswal.com); +91 022 6129 1565
Hafeez Patel – Research Analyst
(Hafeez.Patel@motilaloswal.com); +91 22 3010 2611