Jagran Prakashan

Considering Jagran Prakashan's low debt and good dividend paying record, it looks to be an attractive buy in the media space

JAGRAN Prakashan is a leading newspaper company in North India, having a dominant readership in Uttar Pradesh. The company’s flagship brand, Dainik Jagran, has a readership of 54 million and is one of the most widely read newspapers in India, according to Indian Readership Survey, 2009 Round 2. Dainik Jagran has 37 editions across eleven states.

BUSINESS & INDUSTRY

Besides Dainik Jagran, the company also owns two more brands - Inext and CityPlus. The recently launched Inext is a newspaper targetted at the young and educated Hindi readers who are also conversant with the nitty-gritty of the English language. In contrast, CityPlus is a compact newspaper (weekly), which deals primarily with local news It is circulated across 21 cities. In the December ‘09 quarter, raw materials accounted for 41% of Jagran Prakashan’s total expenditure, suggesting its vulnerability to newsprint prices.

Going forward, the market expects a rise in newsprint prices considering fluctuations in rupee-dollar rates. Some observers expect newsprint costs to rise by 10-15% in FY11 from their current level of around $575 per tonne. Also, due to stiff competition, newspaper companies have resorted to a cut in cover prices. This strategy, though it helps to increase print-runs, it doesn’t translate into higher revenues in the near term. In the December ‘09 quarter itself, Jagran Prakashan’s circulation revenues were Rs 54 crore and the management admitted that had it not resorted to discounting, its revenues would have been higher by 4%.

INVESTMENT RATIONALE:

In recent quarters, regional language newspapers have demonstrated an edge over their English peers in terms of revenues. And Jagran Prakashan, having a dominant readership in North India is likely to continue to do well. In fact, in the December ‘09 quarter, when advertising picked up, the company reported a 10% y-o-y increase in advertising revenues, one of the highest among listed companies. For instance, HT Media’s advertising revenues declined on a year-on-year basis in the last quarter. Jagran achieved this by focussing on local revenues which now account for 63% of its ad revenue, up from 45% three years ago. And local advertising would continue to drive the company’s revenues.

As regards newsprint prices, for Jagran Prakashan, 80% of its newsprint is indigenous, while 20% of newsprint is imported. At present, average newsprint price is in the range of $550/tonne for FY10. However, considering that the bulk of its newsprint comes from the domestic market, it doesn’t have the extent of dependence which its peers have on dollar fluctuations.

VALUATION:

The company’s stock is trading at a P/E multiple of 22.66 times. This is better than that of its immediate peers, HT Media and DB Corp, whose stocks are trading at a P/E of 32.21 and 76 times respectively. Also the fact that the company has low debt and good dividend paying record, makes it a compelling buy in the media space. Investors can consider accumulating the stock at the current level to gain in the long term.