DB Corp

Investors with a two-year horizon can consider buying the shares of DB Corp, publisher of the widely read Hindi newspaper Dainik Bhaskar, given its robust prospects for expanding advertising revenues through pricing and volumes.



The company's strong regional focus helped it tide over the slowdown in advertising in the last 12-18 months and stable newsprint prices meant limited cost pressures.

In FY10, DB Corp's revenues grew by 11 per cent to Rs 1,063 crore, while net profit spiked 284 per cent to Rs 182.8 crore. Advertising revenues grew 11 per cent, largely on the back of increasing volumes.

At Rs 238, the share trades at 19 times its likely FY11 per share earnings. This is at levels similar to what its peer Jagran Prakashan enjoys.

DB Corp derives over 76 per cent of its revenues from advertising, of which 60 per cent is from regional (or retail) category and the rest from national ones.

Dainik Bhaskar currently has 27 editions published across nine largely Hindi-speaking States. With three more regional markets added in March, advertising should receive a reasonable boost, from regional advertisers. According to the ABC figures for January-June 2009, Dainik Bhaskar had a daily circulation of over 2.5 million, the highest in the Hindi language category. This is likely to receive further traction with the recent launches; subject to how it competes with Jagran Prakashan, another entrenched player in some of these markets.

The revival in the economy, evidenced from GDP projections and recent IIP numbers, is a key positive for advertising volumes. That telecom, financial services, FMCG and automobile companies have been increasing their focus on Tier 2, Tier 3 cities means that regional language newspapers are well-positioned to take benefit of the incremental pie.

DB Corp has also increased its advertising rates by about 10 per cent from April for both local and national advertisers. The company is also witnessing a revival in its national advertising segment after almost 18 months as well as in the proportion of colour ads. This should help realise higher yields on advertising. . Its cover realisations too have grown 9.8 per cent.

But circulation revenues may remain largely stable. The newsprint cost is at Rs 25.17 a kg — much lower than last year's and is expected to remain in the Rs 25-26 band, which means limited cost escalation for the company.

via BL