Stock Review: Jagran Prakashan

 

 

Jagran Prakashan will benefit from the merger with Mid-Day, investment by Blackstone and growing digital business. Long-term investors can hold this stock

 

MOST media companies have reported better results in the June 2010 quarter on the back of an improvement in advertising scenario in the country. Jagran Prakashan, one of the largest media companies in Northern India, has also availed the benefit of this revival.

BUSINESS

Jagran Prakashan is one of the largest media companies in northern India with the flagship Hindi newspaper brand, Dainik Jagran, which have a readership of around 54.6 million. The company publishes 12 editions of I-Next, a tabloid bilingual daily newspaper that appeals to the youth, and 23 editions of City Plus, a weekly English tabloid.

INVESTMENT RATIONALE

A) SYNERGY WITH MID-DAY
Jagran's merger with Mid-Day has begun enjoying synergies. Considering the gamut of assets, including Mid-Day, Sunday Mid-Day, Gujrati Mid-Day and The Inquilab (Urdu newspaper), generating funds to retire its high interest rate debt would not be a problem. A benefit of this is expected to reflect in the company's books by the first quarter of the next fiscal.

B) BLACKSTONE'S INVESTMENT
Recently, private equity firm Blackstone Capital Partners has invested around 225 crore in Jagran Media Network — the company holds a majority stake in Jagran Prakashan. This demonstrates the faith the USbased company has in revenue generating potential of the company's businesses across the board. More so, this strategic investment also augurs well for the company's expansion plans of tapping into tier-II and tier-III cities and rural areas. In addition to the funds, the private equity company would also bring in international practices in the company's management that would help in improving brand reach and content production and presentation.

C) NEWSPRINT INVENTORY
In the June quarter, newsprint prices for the industry hovered around $600-615 per tonne. Going forward, experts believe that there is a strong possibility of 8-10% jump in newsprint prices. Jagran Prakashan, however, has sufficient inventory pile up for the current fiscal.

D) NON-PRINT BUSINESSES
Jagran Prakashan reported a turnaround in its nonprint businesses for the June quarter. The company's non-print businesses include web sites of company's publications, outdoor advertising and event management. The division earned revenue of 1.55 crore. It had reported revenue of 2 crore in the whole of last fiscal. The division is expected to post 10 crore in revenue by the end of this fiscal given the momentum in its website business. Under the website or digital business, Jagran has partnered with Yahoo! to offer Hindi news to readers.

FINANCIALS

For the June 2010 quarter, the company's net profit rose by 12% to 56 crore in June 2010 quarter on year-on-year basis. Its net sales increased by 15% to 264 crore. Higher published space, better yield and good sales of iNext and Cityplus contributed to this growth. The company's net margin increased to 39% in the June 2010 quarter from 35% last year.

VALUATION

The stock is available at a P/E of 21 on consolidated basis. Shares if its peers, such as Deccan Chronicle Holdings and HT Media are trading at a price to earnings of 11 and 29 times, respectively. Mid_day's revenues are expected to reflect in Jagran's overall revenue in the next six months after the approval from the court and the ministry of information and broadcasting. The strategic investment by Blackstone Capital Partners in the company would foster its expansion plans and boost its growth without stretching its balance sheet. Long investors can hold onto the company's stock at the present market price.