Jagran Prakashan

Investors with a two-year horizon can consider buying the shares of Jagran Prakashan, the publisher of Dainik Jagran, considering the growth in circulation and buoyant trends in advertisement revenues. This is driven by the paper's regional focus and the possibility of higher revenues through an enhanced thrust on colour ads.

At Rs 118, the Jagran stock trades at 17 times its likely per share earnings for 2010-11. This is at a discount to HT Media and Deccan Chronicle Holdings.

Jagran derives 60 per cent of its advertising revenues from regional advertisers and only the balance from national ones. Jagran has managed to grow volumes by 15 per cent this year in colour advertisements, which offer higher yields.

Colour ads now constitute 45 per cent of the overall advertising pie for the company and may go up further.

With a strong presence in the Hindi heartland across 11 States, the newspaper's rural reach is quite strong. The IRS R2 puts Dainik Jagran as the most read newspaper in the country.

The year 2008-09 saw the company suffer a setback in profits mainly due to higher newsprint prices, even as its advertising revenues held up reasonably.

However, signalling a revival in fortunes, results for the nine months ended December 2009 saw the company's revenues grow 13.4 per cent to Rs 705.6 crore, while net profits doubled to Rs 139.5 crore.

Newsprint costs

Growth in profits this year has also been driven by the 20 per cent fall in newsprint costs. Though newsprint costs are still considerably lower than the peak of $900/tonne in mid-2008, they have been firming up. The company forecasts another 10-15 per cent rise, from the current $510/tonne levels, over the next 12-18 months.

But the more important signal is that the company hopes to grow its advertising revenues by a healthy 15 per cent for the current fiscal.

The FMCG sector has ramped up its ad spends, several new telecom companies have launched operations and are looking to increase penetration, and automobile companies are aggressively increasing sales. These and other (economic situation insulated) sectors such as education are all set to contribute more to the advertising revenues.

Circulation revenues too have grown, albeit at a modest 7.7 per cent over the last year. Some of its competitors have given an annual free subscription offer in certain States that will end later this year. This is expected to lighten the competitive intensity, with a possible increase in cover prices.

via BL