Jagran Prakashan: The right edition

The stock of Jagran Prakashan, publisher of one of the leading Hindi daily Dainik Jagran, has taken a beating in the last one year. Demonetisation, followed by implementation of GST (Goods and Service Tax) took its toll on the newspaper industry, leading to a steep revenue decline. Though the revenue from circulation remained almost unscathed during this period, advertisements, being a major contributor for newspaper companies such as Jagran Prakashan, took a hit.

Now with demonetisation and regulatory blues settling down, signs of revival in ad spend are seen. This trend, along with the likely increase in State and Central Government ad spends in the light of the upcoming elections, bodes well for the company. Advertisement revenue is expected to grow at an annual average rate of nearly 10 per cent till 2020 for the print industry, according to a recent EY FICCI media report.

In this regard, Jagran Prakashan appears well-positioned to reap the benefits of higher ad spends over the next year or so. At ₹166, the stock trades at 19 times its trailing earnings, close to its three-year average. Investors with a two to three-year horizon can buy this stock for steady returns. Along with advertisement revenue growth, the company’s strong market position in States such as Uttar Pradesh and NCR, and strong financials with negligible debt levels are other key positives for the company.

 

Leadership position

Jagran Prakashan is among the top publishers in terms of circulation in States such as Uttar Pradesh, Bihar, Delhi and Haryana. The company has nearly 400 editions and sub-editions published in five different languages and with presence in 13 States.

The investment in expanding the circulation base has paid off well. According to the management, Dainik Jagran has about 20 million readers per day and the total readership for its newspaper (for FY-17) is claimed to be 76 million readers, one of the highest in the industry. Thanks to the company’s circulation expansion efforts, as of December 2017, Dainik Jagran is considered to be the market leader in Patna and Jharkhand also. The management states that this will augur well for the revenue growth, going ahead. Being among the largest regional players, the revival in advertisement from sectors such as FMCG, pharma, education and real estate will help improve revenue.

Revenue to grow

Jagran Prakashan derives over 70 per cent of its revenue from advertisement, with a steady mix of ads from both local and national companies. In the third quarter, the advertisement revenue declined by about 2 per cent y-o-y owing to the split in the festive season between the September and December periods. Also, slower recovery in ad spends from multiple sectors weighed on earnings. However, the company’s other publications such as Nai Dunia recorded advertisement revenue growth of 2-3 per cent in the December quarter.

Going ahead, advertisement revenue is likely to increase as the elections are coming up in the key Hindi-speaking States during the second half of 2018. These are areas where the company has strong presence. The State polls, general elections next year, the recent thrust on rural spends by the government and revival in key sectors in the economy should drive advertisement revenue upwards.

Circulation revenue, on the other hand, contributes about 20 per cent to the overall revenue. In the third quarter, the company registered around 1 per cent y-o-y growth in the circulation revenue, thanks to the consistent effort taken to expand its base.

The company’s radio station, Radio City, has about 48 stations in nine different languages. In the December quarter, the radio business reported a 5 per cent y-o-y operating revenue growth. This segment is expected to provide continuous revenue growth, given its leading position in Mumbai and Bengaluru. The company has plans to improve its radio penetration in other cities also.

Though the digital platform and the radio business contribute only about 10 per cent to the overall revenue, these segments have been reporting consistent growth in the last few quarters. Given the increasing digital penetration and better internet connectivity, advertisers are gradually increasing spends on these platforms.

Strong financials

For the nine months of FY-18, the revenue grew 2 per cent y-o-y to ₹1,756 crore, while the profit declined about 7 per cent y-o-y. The company has strong cash balance and negligible debt levels.

Although raw material cost has not risen by more than 2 per cent in the nine months of FY-18 , newsprint cost still remains aconcern. Though 70 per cent of it is sourced domestically, any increase in import of newsprint could impact the company due to rupee depreciation and price increases.

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