Jagran Prakashan
Capitalising on its premier position
The company is capitalising on its leading position in Hindi daily newspaper through a number of initiatives to keep up its growth momentum
| Buy | Jagran Prakashan |
| BSE Code | 532705 |
| NSE Code | JAGRAN |
| Bloomberg | JAGP@IN |
| Reuter | JAGP.BO |
| 52-week High/Low | Rs 169 / 60 |
| Current Price | Rs 97 (as on 13th February 2008) |
Jagran Prakashan is a leading media house of India, which publishes Dainik Jagran, India's largest read daily with a total readership of 536 lakh readers (IRS 2007 R2). It was also voted the most credible and trusted newspaper in India, according to a survey by Globscan, conducted in 10 of the world's leading countries, including the US, UK, Germany and Russia. Being a leader in Hindi means its reach is much larger than English media majors’ reach.
Dainik Jagran is now published in 31 editions across 11 states from 29 different facilities. The company also publishes two youth oriented newspaper brands viz. I-Next a daily bilingual compact and City Plus, an English infotainment weekly compact, besides publication of Sakhi, a monthly magazine targeted at women. The group also publishes Jagran Varshiki, an annual general knowledge digest, and various national and state statistical compilations.
JP has consolidated its presence in established markets and added 17 new editions in the last five years. JP is also expanding its operations pan India in out-of-home and events management. JP has been building on its strong regional franchise and is open to inorganic route to further boost presence and growth.
Jagran Engage provides specialized ‘Out of Home’ (OOH) advertising services with a pan India footprint. Jagran Solutions provides below the line activities like promotional marketing, event management and on ground activities having pan India presence. J9 provides IVR/AVR/SMS services through its short code service 57272 and is into web space and the company's Hindi news portal, which is known as in.jagran.yahoo.
Jagran Solutions is JPL’s event management business was established in 2006. Since this business compliments the OOH business, the company shares most of its clients with Jagran Engage. The clients of Jagran Solutions include Microsoft, Hutch, Godrej, TVS, ICICI Prudential, Escorts, Standard Chartered Bank, M&M, Bajaj and HLL.
Independent News & Media PLC (Independent)
Impressive earnings growth for the period ended December 2007
For the quarter ended December 2007, Jagran Prakashan reported 29% rise in net sales at Rs 199.03 crore, largely aided by a 29% increase in advertising revenues at Rs 131.15 crore and 11% increase in circulation revenues. Increase in advertisement revenue was driven by increase in total space including color space and also better rates whereas increase in circulation revenue was mainly driven by increase in circulation of Dainik Jagran. Operating margin improved 310bps at 21.7%. With regard to cost elements, the Raw material consumed in proportion to net sales (net of stock adjustments) was lower by 520bps at 36.1% backed by softening in the newsprint prices in the international market and rupee appreciation and other expenditure decreased 150bps at 22.4%. Employee costs increased 60bps at 12.1% and Direct expenses of outdoor, event and SMS services increased 300bps at 7.6% as a % of sales (net of stock adjustments)
Operating profits grew 50% at Rs 43.27 crore. The other income for the quarter decreased 4% at Rs 5.64 crore. The interest cost decreased 12% at Rs 1.43 crore and the depreciation charge inclined 53% at Rs 8.90 crore. The resultant PBT grew 42% at Rs 38.58 crore.
Tax provision (including FBT and Deferred tax) for the quarter increased 38% at Rs 12.68 crore with effective tax rate at 32.9%. The resultant PAT grew 44% at Rs 25.90 crore. Net profit net of prior period adjustment grew 46% at Rs 25.93 crore.
For the nine months ended December 2007, Net sales grew 29% Rs 559.62 crore. The growth was driven by 32% growth in advertising revenues at Rs 374.46 crore. The operating margins improved 260bps at 23.9%. The improvement in margin was backed by 370bps dip in consumption of raw material at 36.1% and other expenditure down 220bps at 21.5% whereas staff cost was up 10bps at 11.8% and Direct expenses of outdoor, Event and SMS business was up 320bps at 6.6% as a % of net sales (net of stock adjustment).
The resultant operating profits inclined 45% at Rs 133.78 crore. Other income was stable at Rs 18.21 crore. The 9% decrease in interest outgo at Rs 4.85 crore and 49% increase in depreciation charge at Rs 24.23 crore resulted in PBT growth of 38% at Rs 122.90 crore. Tax provision including current tax and FBT increased 39% at Rs 40.26 crore. PAT expanded 38% at Rs 82.64 crore. Net profit after prior period adjustment grew 42% to Rs 82.64 crore.
The company expects to maintain the growth momentum going forward.
Highlights during the quarter
The company launched I-Next in Varanasi, Allahabad and Agra and attains status of No.2 newspaper in cities of Kanpur and Varanasi and critical circulation numbers much beyond the expectations in other cities where too it is fast approaching to acquire status of No.2 newspaper.
The company launched 2 more editions of City Plus in New Delhi.
The company has entered into Joint Venture with Television Eighteen for launching business newspaper in Hindi and other regional languages. The company would be starting with Hindi and Gujarati.
Outlook for the Print Media remains buoyant
Worldwide, marketers have reduced their television dependence by focusing more on print, outdoor media and the Internet. The trend is also taking root in India.
According to PWC, the domestic print media market is estimated to grow at 12% CAGR during the next five years, translating to a size of Rs 19500 in 2010, as against a size of Rs 10900 in 2005. This growth is likely to be driven by an increase in literacy and disposable income levels across the country.
Print media also enjoys much better loyalty compared to electronic media.
Strong brand-Big gap between JPL and its nearest competitor
Jagran Prakashan publishes 31 editions and 250 sub editions of Hindi daily newspaper, Dainik Jagaran (DJ) in 11 states covering nearly the entire Hindi speaking base (58% of population) in India. DJ daily is way ahead of nearest competitor Dainik Bhaskar and Amar Ujala in most markets. JP has not only consolidated in its home market but expanded aggressively, launching 17 new editions in last five years. Led by quality content JP has expanded circulations at 14% CAGR in last five years and ad-revenue has grown faster at 26% CAGR accounting for 65% share. JP’s dominant presence in north, rising literacy/per capita income and shift in socio economic groups (SEC-C to B&B to A) provide strong visibility for future growth.
I-Next a, newspaper brand launched in third quarter of last fiscal, was expanded to other markets viz. Varanasi, Allahabad and Agra during the December quarter, After ‘Dainik Jagran’, I-Next has become the most Circulated newspaper ahead of other mainline dailies in the cities of Kanpur and Varansi. It has expanded the market size and has attained circulation numbers and positioning beyond expectations in a short period of time. City Plus, another newspaper brand launched in NCR in second quarter of the previous year, was further expanded with launch of editions at two more locations of New Delhi.
Unique inherent advantages of being a Hindi newspaper
The Indian newspaper industry can be broadly categorized as (1) Hindi, (2) English and (3) the other Indian languages. The Hindi language newspapers comprise 44.6% of the total newspapers while the English ones make 7.4% of the same. The other languages comprise the remaining 48% of the newspapers. It is quite evident that the Hindi language newspapers in aggregate have the highest circulation throughout India. Thus JPL has the advantage of being the market leader in the largest media segment.
Secondly, the growth in the readership of newspapers, particularly those in vernacular languages, is linked to the growth in the literacy rate in the country. According to the 2001 Census, the literacy rate in India stands at 65.2%. However, in the four out of the ten states where DJ's 18 editions are published, the literacy rate is below the national average of 65.2%. The literacy rate in Bihar (47.53%), Jharkhand (54.13%), Uttar Pradesh (57.36%), Jammu & Kashmir (54.46%) are all below the average literacy rate. Thus, as a result of the lower literacy rate in these states, the growth potential is higher.
Strategic partnership with Independent News and Media could facilitate its English newspaper plans
In FY06, JPL entered into a strategic partnership with Independent News and Media (INM). INM is a reputed media house in Europe; publishing 175 titles of newspapers and magazines in nine
countries across four continents. It publishes the flagship national title – The Independent in the U.K. INM is the largest newspaper group in Northern Ireland. It holds 20% stake in JPL and would be publishing the facsimile edition of its international edition of The Independent from New Delhi, fi and when permissions are received. This partnership would facilitate JPL’s entry into the English newspaper segment and publish international content for its Indian readers. Moreover, INM is the largest outdoor advertising operator in South Africa; consequently, JPL is likely to benefit from INM’s international technology, practice and expertise in the Out-of-Home (OOH) business.
Event management and OOH advertising activities picking up
The company’s event management and out-of-home advertising activities have picked up significantly.
JPL has already acquired 1000 sites at strategic locations in OOH and has a credible client base. The management targets revenues from these to grow 7 times to Rs 200 crore by FY10.
JP is also increasing focus on its internet portal Jagaran.com in association with Yahoo India. Jagran Prakashan and Yahoo India, on March 28, 2007, jointly announced the launch of a new co-branded Hindi news and current affairs Internet property. The new property seamlessly Integrates acclaimed Jagran content with Yahoo! India’s online presence
The OOH business clocked revenues of Rs 13 crore for the quarter ended December 2007 with loss at Rs 1.25 crore. The segment has a run-rate of Rs 4 crore per month. The OOH segment would break even in Q4FY08. Currently the occupancy is at 60-65%. The company started its first LED display in Bangalore.
For the nine months, J9 (internet ventures) reported revenues of Rs 2-2.5 crore. It has started a new Home Shopping venture on profit sharing basis. Sizeable revenues would start accruing in 2009-10.
Event management business was loss making in Q2FY08 but profitable for Q3FY08. For FY08, the management expects this segment to be profitable.
Business newspaper in Hindi will be a new growth driver in the long run
Network18 and Jagran Prakashan have announced a 50:50 joint venture initiative in the business print space. The primary mandate of this JV will be to launch a Hindi business daily for the Indian market in 2008. Subsequently, this will be followed by other Indian language dailies focused on financial and economic news.
This JV will in effect create a new category of local language business dailies within the India print space, as this will be the first Hindi business paper to hit the market nationally. The venture has been positioned to benefit from the respective competencies of TV18 & Jagran Prakashan. TV18 shall bring forth its expertise in business content to the JV, while JPL shall bring forth its print competencies including operational expertise, print and related infrastructure and distribution to the venture. Both TV18 & JPL have agreed to co-promote the offerings under the venture and exploit cross platform synergy opportunities present from both sides.
Valuation
In March 2007 the company had announced 25% hike in Ad-rates and another hike is expected in March 2008.
We expect the company to register EPS of Rs 3.3 in FY 2008 and Rs 4 in FY 2009. The share price trades at Rs 97. While P/E on FY 2008 EPS works out to 29, it falls to 24 on FY 209 EPS. Due to its premier position in Hindi daily news media which it is capitalising on through ad rate hikes, increased coluur advertising, new synergistic launches, outdoor advertising, event management, internet and business newspaper, the company will continue to command premium valuations.
| | 0503 (12) | 0603 (12) | 0703 (12) | 0803 (12P) | 0903 (12P) |
| Sales | 376.37 | 480.53 | 598.18 | 764.20 | 947.60 |
| OPM (%) | 6.8 | 14.6 | 20.0 | 22.1 | 22.0 |
| OP | 25.42 | 70.16 | 119.84 | 168.56 | 208.47 |
| Other inc. | 1.01 | 6.35 | 24.80 | 24.71 | 25.00 |
| PBIDT | 26.43 | 76.50 | 144.64 | 193.27 | 233.47 |
| Interest | 6.87 | 7.61 | 8.50 | 7.71 | 7.50 |
| PBDT | 19.56 | 68.89 | 136.14 | 185.55 | 225.97 |
| Dep. | 17.57 | 20.12 | 23.72 | 35.44 | 41.81 |
| PBT | 1.99 | 48.77 | 112.43 | 150.11 | 184.16 |
| EO | 0.00 | 2.17 | 0.00 | 0.00 | 0.00 |
| PBT after EO | 1.99 | 46.61 | 112.43 | 150.11 | 184.16 |
| Tax | 0.76 | 14.91 | 38.95 | 51.04 | 62.61 |
| PAT | 1.23 | 31.70 | 73.48 | 99.07 | 121.55 |
| EPS* (Rs) | 0.2 | 1.1 | 2.4 | 3.3 | 4.0 |
| * Annualised on Current equity of Rs 60.23 crore; | |||||
| Jagran Prakashan: Results |
| | 0712 (3) | 0612 (3) | Var. (%) | 0712 (9) | 0612 (9) | Var. (%) | 0703 (12) | 0603 (12) | Var. (%) |
| Net Sales | 199.03 | 154.57 | 29 | 559.62 | 434.52 | 29 | 598.18 | 480.53 | 24 |
| OPM (%) | 21.7 | 18.6 | | 23.9 | 21.3 | | 20.0 | 14.6 | |
| OP | 43.27 | 28.75 | 50 | 133.78 | 92.47 | 45 | 119.84 | 70.16 | 71 |
| Other Income | 5.64 | 5.88 | -4 | 18.21 | 18.21 | 0 | 24.80 | 6.35 | 291 |
| PBIDT | 48.91 | 34.64 | 41 | 151.99 | 110.68 | 37 | 144.64 | 76.50 | 89 |
| Interest | 1.43 | 1.63 | -12 | 4.85 | 5.32 | -9 | 8.50 | 7.61 | 12 |
| PBDT | 47.48 | 33.01 | 44 | 147.13 | 105.36 | 40 | 136.14 | 68.89 | 98 |
| Depreciation / Amortization | 8.90 | 5.83 | 53 | 24.23 | 16.25 | 49 | 23.72 | 20.12 | 18 |
| PBT before EO | 38.58 | 27.18 | 42 | 122.90 | 89.11 | 38 | 112.43 | 48.77 | 131 |
| EO (net of tax) | 0.00 | 0.00 | | 0.00 | 0.00 | | 0.00 | 2.17 | |
| PBT after EO | 38.58 | 27.18 | 42 | 122.90 | 89.11 | 38 | 112.43 | 46.61 | 141 |
| Tax | 12.68 | 9.20 | 38 | 40.26 | 29.02 | 39 | 38.95 | 14.91 | 161 |
| PAT | 25.90 | 17.98 | 44 | 82.64 | 60.09 | 38 | 73.48 | 31.70 | 132 |
| Prior period items (net) | -0.02 | 0.28 | | 0.00 | 1.96 | | -2.74 | 0.00 | |
| PAT | 25.93 | 17.70 | 46 | 82.64 | 58.13 | 42 | 76.22 | 31.70 | 140 |
| EPS * | 3.4 | 2.4 | | 3.7 | 2.7 | | 2.4 | 1.1 | |
| * Annualised on current equity of Rs 60.23 crore. | |||||||||
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