DB Corp Pinc 071210

SECTOR REPORT
RESEARCH
Contents
Print Media Overview ...............................................................................
Regional Print Media ................................................................................
Print Media Operational Model - Key Revenue & Cost Drivers ...............
Sector Key Concerns ..............................................................................
Investment Rationale Summary ..............................................................
Companies
Dainik Bhaskar Corporation Ltd . .............................................................
13
Jagran Prakashan Ltd. ............................................................................
21
Hindustan Media Ventures Ltd. ................................................................
30
Hindustan Times Media Ltd. ....................................................................
39
Annexures ..................................................................................................
47
RESEARCH
Sector View - Positive
PRINT MEDIA: ON GROWTH TRACTION

We initiate coverage on the print media sector with a positive view, underpinned by strong growth potential of regional media players. The latest Q2FY11 results support our view on growth in advertising volumes and yields for the industry. Macro factors such as increase in penetration and reduction in gap between 'Can Read' and 'Presently Reading' ensure expansion of the market as a whole. Currently the print market is Rs190bn in size and is expected to grow at 9% CAGR to Rs225bn by 2012 (2010 KPMG report). We believe this growth would be fueled by Tier II and Tier III cities owing to increased consumption across various sectors, FMCG, Real Estate, Automobiles. During the recent economic slowdown, regional newspapers outperformed English newspapers, supported by a resilient business model, higher local content and ad revenue, and a healthy ad: circulation revenue mix. Our picks in the sector are: Dainik Bhaskar Corporation Ltd We expect top line and PAT to grow at 16% and 22% CAGR respectively over FY10-12. At CMP, the stock trades at 17x FY12E. We initiate coverage with 'BUY' rating and 12 month target price of Rs315 (21xFY12E EPS). Jagran Prakashan Ltd We estimate sales and PAT to grow at 20% and 22% CAGR respectively over FY10-12. We initiate coverage with BUY rating and 12 month target price of Rs 165 (20x FY12E EPS). Hindustan Media Ventures Ltd We expect revenue and PAT to grow at 18% and 35% CAGR respectively over FY10-12. At CMP, the stock trades at 14x FY12E EPS (steep discount to current valuations of JPL and DBCL). We initiate coverage on the stock with BUY and 12 month target price of Rs200 (17x FY12E EPS) - maintaining current discount to the valuation (targeted P/E) of DBCL (21x FY12E EPS) and to the valuation (targeted P/E) of JPL (20x FY12E EPS). Hindustan Times Media Ltd We expect top line and PAT to grow at 18% and 19% CAGR respectively over FY10-12. At CMP, the stock trades at 19x FY12E. We initiate coverage with 'HOLD' with a target price of Rs163 (20xFY12E EPS). Sector Key Concerns Newsprint Prices: They form a major ~30-35% of sales; any volatility in newsprint prices would impact margins. Foreign Currency Risk: Majority players import newsprint (vernacular players import ~20% of the requirement) forex fluctuations would have considerable impact on newsprint cost.
Namrata Sharma +91-22-6618 6412 [email protected] Ronak Bakshi +91-22-6618 6411 [email protected] Rohit Kumar Anand +91-22-6618 6372 [email protected] 07 December 2010
Ad Gr (%)* DBCL JPL # HMVL HTML 19 25 26 16
Rev. Gr (%)* 16 20 18 18
EBIDTA Gr (%)* 16 20 30 28
PAT Gr (%)* 22 22 35 19
* CAGR (FY10-FY12E) # Incl Mid-day print business
SECTOR OVERVIEW
Stock Performance (%) 1M D B Corp Jagran HTML HMVL SENSEX (5.9) 3.4 (5.0) (8.6) (2.6) 2M (6.4) 6.9 (6.2) (15.6) (2.7) 4M 5.5 13.9 (4.1) (14.5) 9.3
Sector Summary
KEY FINANCIALS
Company DB Corp JPL HMVL HTML CMP (Rs) 265 135 167 152 Mkt Cap (Rs bn) 48.3 40.8 12.1 36.3 Net Sales (Rsmn) FY11E 12,373 11,422 5,236 16,831 FY12E 14,345 13,643 6,151 19,566 EPS (Rs) FY11E 13.0 7.1 7.9 6.7 FY12E 15.0 8.2 11.6 8.2 P/E(x) FY11E 19.5 18.9 20.7 22.9 FY12E 17.0 16.4 14.0 18.8 TP (Rs) 315 165 200 163 Upside 19% 22% 20% 7% Rating BUY BUY BUY HOLD 1
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RESEARCH
Print Media Overview

The size of the print media sector is Rs190bn which has 49% share in the total advertising market. The newspaper segment forms a major part of the print media sector with revenue size of Rs175bn (92% of print media). Consumption-led growth, mainly in Tier II and Tier III cities, supported by economic revival, makes a strong case for revival in ad revenue for the industry as a whole. The print media is expected to register CAGR of 9.1% over FY10-14P (as per KPMG FICCI 2010 report) and advertisement revenue is likely to grow at 11.6% CAGR over FY10-14P. Key drivers for this growth would be: 1) Overall increase in advertisement spend on the back of economic revival: Indias advertisement-spend-to-GDP ratio is expected to grow and catch up with that of developed nations. The ratio is 0.41% now, much lower than Chinas 0.75%. 2) Increasing print penetration and reach, especially in Tier II and Tier III cities, supported by favorable demographics, increasing purchasing power and growth in literacy levels.
Print media to grow at a 9.1% CAGR (FY10-14P)...
Exhibit 1 - Print media industry size

INR billion Advertising Circulation Total industry size Newspapers Magazines Total industry size 2007 100 60 160 148 12 160 2008 108 64 172 159 13 172 2009 2010p 2011p 2012p 2013p 2014p 103 72 175 162 13 175 114 76 190 175 14 190 127 80 207 191 16 207 141 84 225 208 17 225 158 88 246 227 19 246 176 92 268 248 20 268 CAGR (2010-14) 11.60% 5.00% 9.10% 9.10% 9.10% 9.10%
Source: KPMG, PINC Research
Exhibit 2 - Ad Growth Rate of Players vs Industry (YoY %)

DBCL HT Media 50 JPL TOI* (July y r ending) HMVL Print Ad Industry
30
Hindi ad growing much stronger than English ad even in tough economic situation during FY09/FY10...
10
-10
FY07
FY08
FY09
FY10
-30
Source: Company, PINC Research
[email protected]
RESEARCH
Growth lies in regional print media

We believe growth in the advertisement industry would be fueled by Tier II and Tier III cities owing to increased consumption across FMCG, Real Estate, Automobiles sectors that are biggest contributors to the advertisement pie. New sectors like Banking, NBFC, Insurance, Telecom, and retail have joined the list. National advertisers across various sectors have started targeting rural and semi-urban areas mainly because of the growth potential of these markets. We believe cheaper advertisement rates in non-English media would support expansion of advertising in KUT (key urban towns) and ROUI (rest of urban India). Refer annexure 1.
Exhibit 3 - Indian Print Landscape: Strength of regional print media

Indian Print Landscape 20 States + 2 Union Territories English Market Mumbai, Delhi, Chennai, Bangalore, Kolkata, Hyderabad. Population - 50 Million Goa, Chandigarh would also be other cities important for English. Hindi 11 States - Uttar Pradesh, Bihar, Rajasthan, Jharkhand, Chattisgarh, Himachal Pradesh, J&K, Punjab, Haryana, Uttarakhand, Madhya Pradesh. Assam, Meghalaya, Manipur, Mizoram, Tripura, Sikkim, Nagaland, Arunachal Pradesh + Pondicherry, Daman, Andaman Nicobar, Lakshadweep, Dadra Nagar Haveli are not considered as priority print markets. Regional / Language Market Vernacular Gujarat Maharashtra (excluding Mumbai) Orissa Bengal (excluding Kolkata) Kerala Karnataka (excluding Bangalore) Population - 480 Million Readership - 59 million Tamil Nadu (excluding Chennai) Population - 50 Million Population - 77 Million Population - 37 Million Population - 75 Million Population - 31 Million Population - 47 Million Population - 57 Million
Andhra Pradesh (excluding Hyderabad) Population - 72 Million
Source: Population data sourced from www.india.gov.in
Exhibit 4 - Cheaper advertisement rates in non English papers.

Publication The Times of India Hindustan Times The Times of India Dainik Bhaskar Eenadu Dainik Jagran Gujarat Samachar Malayala Manorama Edition Mah+Delhi Mah+Delhi All editions All editions Andhra Pradesh All editions Gujarat Kerala Readership (000s) 3,803 2,540 7,088 13,303 6,087 15,925 4,506 9,728 BW card rate (Rs per sq cm) 6,765 3,700 7,749 4,456 1,915 3,825 825 990 Rs cost per thousand 1.78 1.46 1.09 0.33 0.31 0.24 0.18 0.10 CPT index 100 82 61 19 18 14 10 6
Source: IRS Q210, Mediaware March 2010, PINC Research
[email protected]
RESEARCH
Exhibit 5 - Metro, KUT & ROUI share in newspaper ad in 09

Metro Cellular Consumer Durables Education Automobiles Domestic Airlines Retail Properties/Real Estate Oral Hy giene Hair Care Skincare Confectioneries Ice Cream Bev erages Chocolates Instant Food/Meals 0%
Source: E&Y
KUT & ROUI 82% 77% 52% 53% 46%
18% 23%
28% 35% 25% 21% 20% 28% 18% 27%
48% 47% 54%
48% 45% 40%
72% 65% 75% 79% 80% 72% 82% 73%
52% 55% 80% 100%
20%
60%
Exhibit 6 - Ad Revenue/Reader
DBCL 3,200 2,400 JPL HMVL HTML DCHL TOI
Gap between ad revenue/ per reader of English and regional players is reducing...
(Rs)
1,600 800 FY07 FY08 FY09 FY10
We are positive on growth prospects of vernacular players owing to: 1) a wide scope of expansion (bridging the gap between 'Can Read' and 'Currently Reading') (ref. annexure 2); 2) aggressive marketing and promotional activities in Tier II and Tier III cities by FMCG, Real Estate, Banking sectors; and 3) relatively greater discount in ad rates. During the recent global economic meltdown, the regional print media outperformed the English print media, supported by a resilient business model, higher local content and ad revenue, and a healthy ad: circulation revenue mix.
Exhibit 7 - Ad Growth Rate (YoY)

28% DBCL JPL HTML
Current Qtr results strengthen our belief of strong growth of the regional print media sector
At an all India level, the ad pie of Hindi newspapers grew 27% YoY in vol during January-July 2010 (source: Adex);Hindi print media topping in volume growth...
21% 14% 7% 0% FY09 Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Q4FY10 FY10 Q1FY11 -7% Q2FY11
4
Source: Company, PINC Research [email protected]
RESEARCH
Exhibit 8 - Operational Model
Print Business Dynamics
Revenue Drivers
Cost Drivers
Ad Revenue
Circulation
Newsprint*
Others - Employee cost 12%-15% of sales &
Ad Space x Ad rate
Circulation copies x Cover price
Mkt/Promotional cost 30-35% of Sales 5%-6% of sales
Ad Mkt Size-Rs114 bn Maj.Players-Ad Rev. (FY10) (in Mn) TOI DBCL JPL HMVL HTML DCHL 31,536 7,776 6,384 2,964 8,443 8,343
Cir Mkt Size-Rs76 bn Maj.Players-Cir Rev. (FY10) (in Mn) TOI DBCL JPL HMVL HTML DCHL 3444 2118 2138 1208 625 581 Macro Global Newsprint demand / supply Newsprint RM prices (Pulp price, Energy cost / Crude price) Foreign currency / Exchange rate Factors Micro Inventory holding period Newsprint contract period
Factors Macro Economic Growth Rate Literacy Spending Power Micro Competition Readership base Ad : Edit Ratio
Source: PINC Research
* See Sector key concerns (for details on newprint)
[email protected]
RESEARCH
Revenue drivers
Ad revenue to clock 12% CAGR (FY10-14P) driven by robust GDP growth... Advertisement Revenue Advertisement is the main contributor to revenue and profitability of print media players. Generally advertisement revenue forms 70-80% of total revenue. Advertising has a direct correlation to economic growth (0.4% of GDP). We believe over all ad revenue would grow at a healthy rate of 12% (FY10-FY14P) given that the Indian economy is expected to grow at 8-9% over the next few years.
Exhibit 9 - Print Industry Ad Revenue (Rsbn)

Adv ertising Rev enue (LHS) 200 Adv ertising Grow th rate YoY % (RHS) 24.0%
150 INR (bn)
16.0%
100
8.0%
50
0.0%
0 2007
Source: FCCI 2010
-8.0% 2008 2009 2010p 2011p 2012p 2013p 2014p
Circulation Revenue Circulation is the most important driver for increasing advertisement revenue. Readership base and circulation numbers decide a print media company's advertisement market share in that region. Leadership in readership/circulation fetches premium ad rates.
Exhibit 10 - Print Circulation Revenue (Rsbn)

Circulation Rev enue (LHS) 120 Circulation Grow th rate YoY % (RHS) 16.0%
90 INR (bn)
12.0%
60
8.0%
30
4.0%
0 2007
Source: FICCI 2010
0.0% 2008 2009 2010p 2011p 2012p 2013p 2014p
[email protected]
RESEARCH
Sector Key Concerns

Uptrend in newsprint prices Newsprint cost forms a major cost component at ~30-32% of sales and 43-45% of total expenditure. Fluctuation in newsprint prices affects profitability of print media companies. However, in case regional players, consumption of indigenous newsprint is higher: indigenous to imported newsprint mix is 80:20%. Generally, companies enter into medium-term newsprint contracts of 3-6 months. Exchange rates also play a crucial role in determining the final price of newsprint. Hence domestic newsprint prices are at 10-15% discount to imported newsprint. We believe over the shot term (3-5 months), newsprint prices would not have a significant impact as most companies have newsprint inventory of 1-3 months and medium-term newsprint purchase contracts in place. We have assumed newsprint prices at USD650/MT - USD720/MT for FY11-12.
Exhibit 11 - Newsprint Prices in USD/MT

1200 1050 900 750 600 450 300 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 May-02 May-03 May-04 May-05 May-06 May-07 May-08 May-09 May-10 Sep-10
7 Current year's avg newsprint (till Oct'10) is at - $ 746/MT Newsprint prices at its peak impacting OPM of print compaines drastically
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Source: Bloomberg, PINC Research
Increased competition Print media has strong entry barriers due to high capex requirements and a long breakeven period of 3-5 years. Print players have strong readership loyalty locally; they are leaders in their home markets. However, in the recent past, we have seen increased competition in the form of deeper penetration by existing players and entry of new players. This has led to reduced cover prices - JPL and HMVL had to cut cover price to half from Rs4 to Rs2 in Jharkhand region because of entry of DBCL in Ranchi at Rs2. We expect heightened competition to keep cover prices at current levels and do not expect them to increase. Foreign Currency Risk Majority of the players import newsprint (however vernacular players import ~20% of the requirement) thus forex fluctuations have considerable impact on the cost of the newsprint. Canada is the largest producer and exporter of newsprint. Thus, any fluctuation in the Canadian dollar impacts overall newsprints prices.
Industry Regulation
As per the current norm, FDI is allowed up to 26% of equity capital in the print media sector.
[email protected]
Jan-10
RESEARCH
Investment Rationale Summary

Going forward, we expect growth to be chiefly driven by semi-urban and rural regions led by: 1) Increasing consumption-led growth; 2) Higher ad spend by local and national advertisers; and 3) rising literacy and greater scope of increasing readership because of high gap between 'Can Read' and 'Currently Reading'. Since regional players dominate these regions, we prefer vernacular players. On the backdrops of this note we initiate coverage on: DBCL, JPL, HMVL and HT Media.
Dainik Bhaskar Corporation Ltd

DBCL's strategic penetration into high growth markets, optimum exploitation of readership base and uniformly distributed business model makes us positive on its growth prospects. Attractive growth opportunity in Hindi/regional print dailies makes a strong case for DBCL, with its business model skewed toward ad revenue (76% of total revenue). We expect top line and PAT to grow at 16% and 22% CAGR respectively over FY10-12. At CMP, the stock trades at 17x FY12E. We initiate coverage with 'BUY' with 12 month target price of Rs315 (21xFY12E EPS).
Exhibit 12 - Financials
Rs mn FY09 FY10 FY11E FY12E Net Sales 9,490 10,630 12,373 14,345 Gr(%) 11.6 12.0 16.4 15.9 EBIDTA 1,353 3,429 4,063 4,625 OPM(%) 14.3 32.3 32.8 32.2 PAT 476 1,828 2,382 2,734 Gr(%) (36.6) 283.9 30.3 14.8 EPS(Rs) 2.8 10.0 13.0 15.0 Gr(%) (36.5) 254.4 30.3 14.8 PER(x) 90.0 25.4 19.5 17.0 ROANW % 18.5 28.2 28.9 26.6 ROACE % 13.6 30.6 34.4 34.5
Exhibit 13 - Dainik Bhaskar Readership across states

MP 20 16 0.22 1.12 1.32 3.54 0.21 1.10 1.37 3.57 0.20 1.02 1.34 3.44 5.74 3.06 R1-09 0.18 1.12 1.32 3.36 5.69 3.03 R2-09 0.20 1.06 1.39 3.23 6.00 3.23 1Q-10 0.18 1.02 1.40 3.37 0.17 0.97 1.45 3.58 Rajasthan Gujarat Hary ana Chhattisgarh Chandigarh
Presence in almost all the major Hindi Markets - 14 states...
In Mn
12 8
5.76 4 3.13 0 R1-08
5.82 3.13 R2-08
6.12
6.10
3.20 2Q-10
3.36 3Q-10
Competitors
MP Rajasthan Gujarat Nai Dunia Rajasthan Patrika Gujarat Samachar 1.08 7.14 4.47 Haryana Chhattisgarh Chandigarh Punjab Kesari Hari Bhoomi Amar Ujala 1.03 0.89 0.08
Source: IRS, PINC Research
[email protected]
RESEARCH
Jagran Prakashan Ltd

JPL is the largest in terms of readership (for the last 14 IRS rounds). It is a cost-efficient player with phased and planned expansion plans in other forms of media businesses, and a wide portfolio (including Mid-day). We are positive on its business model and believe the company is well poised to benefit from steady growth in the print media sector. We estimate sales and PAT to grow at 20% and 22% CAGR respectively over FY10-12. At CMP, the stock trades at 16x FY12E EPS (after incorporating Mid-Day numbers). We initiate coverage with 12 month target price of Rs 165 (20x FY12E EPS).
Rs mn FY09 FY10 FY11E FY12E Net Sales 8,234 9,419 11,422 13,643 Gr(%) 9.8 14.4 21.3 19.4 EBIDTA 1,567 2,823 3,685 4,342 OPM(%) 19.0 30.0 32.3 31.8 PAT 916 1,759 2,254 2,608 Gr(%) (6.8) 91.9 28.2 15.7 EPS(Rs) 3.0 5.8 7.1 8.2 Gr(%) (6.8) 91.9 22.1 15.7 PER(x) 44.4 23.1 18.9 16.4 ROANW % 16.4 28.7 27.5 24.7 ROACE % 18.7 33.6 34.2 32.2
Exhibit 15 - Dainik Jagran Readership across states

UP 20 Uttaranchal Delhi Bihar+Jharkhand Punjab Hary ana
Largest read daily for the last 14 IRS round with 54 mn readership base...
In Mn.
0.93 15 0.99 3.61 10
0.97 0.93 3.37
0.92 0.87 3.21
0.91 0.97 3.16
0.94 0.96 3.38
0.92 0.89 3.31 0.93 0.80 3.35
9.16
9.19
9.14
9.07
9.07
8.85
8.95
0 R1-08 R2-08 R1-09 R2-09 1Q-10 2Q-10 3Q-10
Competitors
UP Uttaranchal Delhi Amar Ujala Amar Ujala Navbharat Times 6.75 0.81 1.80 Bihar+Jharkhand Punjab Haryana Hindustan Punjab Kesari Dainik Bhaskar 6.15 1.08 1.45
[email protected]
RESEARCH
Hindustan Media Ventures Ltd

We expect revenue and PAT to grow at 18% and 35% CAGR respectively over FY10-12. At CMP, the stock trades at 14x FY12E EPS (steep discount to current valuations of JPL and DBCL). We initiate coverage on the stock with BUY and 12 month target price of Rs200
(17x FY12E EPS) - maintaining current discount to the valuation (targeted P/E) of DBCL (21x FY12E) and to the valuation (targeted P/E) of JPL (20x FY12).
Rs mn FY09 FY10 FY11E FY12E Net Sales 176 1,623 5,236 6,151 Gr(%) 17.5 EBIDTA 5 246 972 1,351 OPM(%) 3.0 15.2 18.6 22.0 PAT 1 154 577 854 Gr(%) 48.1 EPS(Rs) 0.3 2.7 7.9 11.6 Gr(%) 48.1 PER(x) 561.1 61.9 20.7 14.0 ROANW % 0.7 35.8 15.5 20.1 ROACE % 2.7 23.9 20.8 27.0
Exhibit 17 - Hindustan Readership across states

Bihar 12 1.16 2.92 1.47 1.16 3.19 1.63 Jharkhand UP Delhi
In Mn.
Emerging player in UP- the largest Hindi market...
0.95 2.15 1.16
1.10 2.19 1.22
1.26 2.31 1.25 4.34
1.18 2.35 1.20 4.33
1.19 2.60 1.35
4.38
4.56
4.48
4.29
4.52
0 R1-08 R2-08 R1-09 R2-09 1Q-10 2Q-10 3Q-10
Competitors
Bihar Jharkhand Dainik Jagran Prabhat Khabar 2.53 1.13 UP Delhi Dainik Jagran Navbharat Times 8.95 1.80
[email protected]
10
RESEARCH
Hindustan Times Media Ltd

We expect top line and PAT to grow at 18% and 19% CAGR respectively over FY10-12. At CMP, the stock trades at 19x FY12E. We initiate coverage with 'HOLD' with a target price of Rs163 (20xFY12E EPS).
Rs mn FY09 FY10 FY11E FY12E Net Sales 13,466 14,129 16,831 19,566 Gr(%) 12.0 4.9 19.1 16.2 EBIDTA 879 2,554 3,672 4,444 OPM(%) 6.7 18.1 21.8 22.7 PAT 9 1,359 1,573 1,916 Gr(%) 15.7 21.8 EPS(Rs) 0.8 5.8 6.7 8.2 Gr(%) 15.7 21.8 PER(x) 26.5 22.9 18.8 ROANW % 0.1 14.9 15.1 15.9 ROACE % 4.5 17.6 26.2 30.5
Exhibit 19 - Hindustan Times Readership across states

Delhi 2.8 0.53 0.38 0.55 0.50 0.54 0.56 0.59 Mumbai
In Mn.
Maintain strong position in Delhi and Mumbai...
2.1
1.4 1.86 0.7 2.01 1.99 1.93 2.01 1.96 1.91
0 R1-08 R2-08 R1-09 R2-09 1Q-10 2Q-10 3Q-10
Competitors
Delhi Source: IRS, PINC Research The Times of India 1.86
[email protected]
11
Exhibit 20 - Global Peer Valuation

Bberg Code CMP Mkt Cap (mn) Sales Net Income P/E(x) ROE(%) Div Yld(%) EV/EBITDA(x)
[email protected]
Asia SPH SP STAR MK 3 2,504 1,045 176 14.0 15.2 16.3 4 6,730 1,228 402 16.8 18.0 5.5 12.8 7.3
RESEARCH
Singapore Press Holdings(SGD) *
Star Publications (MYR) **
Europe (GBP) DMGT LN JPR LN TNI LN 75 193 779 69 2.8 10 64 408 24 3.0 532 2,031 2,073 200 10.2 138.5 7.2 18.5 3.1 0.0 1.9 7.7 5.0 3.2
Daily Mail & general trust*
Johnston Press**
Trinity Mirror**
USA (USD) ** SSP US GCI US NYT US 9 1,367 2,397 15 3,572 5,482 585 110 10 566 787 26 22.4 6.2 13.6 1.1 4.0 4.7 5.4
Ew Scripps
Gannett Co.Inc.
New York Times
India (INR) * DBCL IN JAGP IN HTML IN HMVL IN DECH IN 106 172 146 34,313 12,623 25,686 137 41,140 262 47,479 12,274 10,771 16,703 5,430 10,852 2,429 2,043 1,737 787 3,036 20.0 20.0 19.9 15.0 8.4 32.1 16.7 33.4 20.7 1.0 2.7 0.4 1.3 4.5 12.4 11.0 9.3 4.4
DB Corp
JPL
HTML
HMVL
DCHL
Source: Bloomberg (as on 07-12-10)
* Estimates for FY 11
** Estimates for CY 10
12
Initiating Coverage Sector: Media BSE Sensex: 19,981
RESEARCH
DAINIK BHASKAR CORPORATION LTD

Investment Rationale
Strong earnings and profitability on aggressive expansion DB Corp Limited (DBCL) continues to expand aggressively, which would enable it to achieve strong growth in earnings and profitability; currently, the emerging editions contribute 10% to the company's total revenue. Expansion in Jharkhand would be completed with the launch of Dhanbad and Jamshedpur editions by end-FY11. The Bihar edition will be launched in FY12. Moreover, the company would be setting up around 9-10 new printing centres in its existing territories of Rajasthan, Punjab, Madhya Pradesh and Gujarat. Ad-driven business model The company's strategy of aggressive cover prices renders ad revenue as its main growth driver, enabling it to attain No.1 position from the first day of a launch. Moreover, attractive growth opportunities in Hindi/ regional print dailies make a strong case for DBCL, where the model is skewed toward ad revenue (76% of total revenue), which entails higher operating leverage (during 1HFY11, ad revenue grew 18% although 1HFY10 was a festive period). We expect ad revenue to grow at 20% CAGR over FY10-12. Multiple growth opportunities from uniformly diversified business model DBCL has presence in all major tier II and tier III markets, largely capturing the Hindi belt. It is also the second-largest circulated newspaper in Gujarat. The company expanded to 14 new states in the past 14 years (which implies a new state every year) and it entered the radio business with 17 stations. DBCL's presence across multiples languages, geographies and media platforms differentiates it making it a preferred player over competition. VALUATIONS AND RECOMMENDATION The company is self sufficient for expansion into new regions. It has already undertaken capex of Rs3.5bn over the past two years for upgrade and addition of printing facilities. After factoring in capex requirements of Rs1bn over the next two years, we expect healthy ROE of 27%, ROCE of 35% and FCF of Rs2.4bn by FY12. With revenue CAGR of 16% over FY10-12E, we expect DBCL to maintain its operating margins at 32% and net margins at 19%. We initiate coverage with 'BUY' with 12 month target price of Rs315 (21xFY12E EPS).
STOCK DATA
Market Cap Book Value per share Eq Shares O/S (F.V. Rs10) Free Float Avg Traded Value (6 mnths) 52 week High/Low Bloomberg Code [email protected] Ronak Bakshi +91-22-6618 6411 [email protected]
BUY CMP Rs265 TP Rs315

07 December 2010
Namrata Sharma +91-22-6618 6412
Rohit Kumar Anand +91-22-6618 6372 [email protected]
Initiating Coverage
Rs48.3bn. Rs35.7 182mn. 14% Rs 19.4mn Rs310/210 DBCL IN
TOP SHAREHOLDERS
Name Cliffrose Investment Ltd India Capital Fund Limited % holding 3.6 1.3
PERFORMANCE (%)
Absolute Relative 1M (5.9) (3.4) 3M 1.3 (6.5) 11M (2.6) (11.7)
KEY FINANCIALS
FY08 Net Sales YoY Gr. (%) Op. Profit Op. Margin (%) Adj. Net Profit YoY Gr. (%) 8,506 28 1,708.6 20.1 750.6 40.1 4 25.9 34.2 57.1 5.3 26.6 FY09 9,490 12 1,353.2 14.3 476.2 (36.6) 3 13.6 18.5 90.0 5.1 35.5 FY10 10,630 12 3,429.4 32.3 1,828.0 283.9 10 30.6 28.2 25.4 4.5 13.9 FY11E 12,373 16 4,062.7 32.8 2,382.3 30.3 13 34.4 28.9 19.5 3.8 11.5
Rs mn FY12E 14,345 16 4,625.2 32.2 2,734.0 14.8 15 34.5 26.6 17.0 3.2 9.8 13
RELATIVE PERFORMANCE
DB BSE (Rebased)
350 280 210 140 70 Jan-10
KEY RATIOS
Dil. EPS (Rs) ROCE (%) ROE (%) PER (x) EV/Sales (x) EV/EBDITA (x)
Mar-10
Jun-10
Sep-10
Nov -10
RESEARCH
Aggressive expansion to drive earnings and profitability

DBCL plans to launch Bihar and Jammu editions by next financial year. The company would be covering Jharkhand extensively by launching the Dhanbad and Jamshedpur editions. In addition, it would be setting up around 9-10 new printing centers in the existing territories of Rajasthan, Punjab, Madhya Pradesh and Gujarat. DBCL intends to launch new editions in the existing areas to increase localization of content. We believe this would not only increase the readership base, but also enable the company to command higher rates. We believe that as the emerging editions start moving toward the matured ones, DBCLs revenue and profit growth would outperform the industry.
Exhibit 21 - Emerging editions financials

FY10 (Rsmn) Ad Rev Circulation OI Total Income Emerging editions 724.02 246.10 10.62 980.74 508.76 586.91 1,095.67 (114.93) (11.72) 12.10 34.40 (161.43) (16.46) Matured editions and others 7,051.83 2,004.00 224.20 9,280.03 2,769.10 2,934.95 5,704.05 3,575.98 38.53 134.74 232.02 3,209.22 34.58 Emerging editions as % of total revenue 9.31 10.94 4.52 9.56 15.52 16.66 16.11 NA NA 8.24 12.91 NA NA
Currently emerging editions contribute 9% to overall ad revenue and 11% to overall circulation revenue...
News Print Cost Opex Total Cost EBIDTA OPM % Interest Depreciation PBT PBT%
Exhibit 22 - Emerging editions & Matured editions

Emerging Editions Danik Bhaskar - Ratlam -Amritsar -Jalandar -Ludhiana -Jharkhand Others -DB Star (Bhopal & Indore) -DNA (Ahmedabad, Surat and Jaipur) -Business Bhaskar (Bhopal, Indore, Raipur, Punjab and Delhi)
An edition takes around 4 years to break even...
Matured Editions - Bhopal - Indore - Raipur - Bilaspur - Jaipur - Ajmer - Jodhpur - Bikaner - Udaipur - Kota - Chandigarh - Panipat - Hissar - Faridabad - Ahmedabad - Rajkot - Surat - Baroda - Bhavnagar - Mumbai
Source: Company, PINC Research [email protected] 14
RESEARCH
Business model driven by ad revenue

DBCLs strategy of aggressive cover prices renders ad revenue as its main growth driver; this has enabled the company to attain No.1 position from the first day of a launch. Moreover attractive growth opportunities in Hindi/regional print dailies make a strong case for DBCL, where the model is skewed toward ad revenue (76% of total revenue) entailing higher operating leverage (during 1HFY11, ad revenue grew 18% despite the high base effect).
Exhibit 23 - Leadership attaining strategy

High growth markets with low print penetration Ability to Justify Revenue Profit The potential in print consumption gauged by proper prior launch market study. Business experience, proven ability to operate and launch in different geographies with different languages, different socio-economic cultures Aggressive pricing Innovative product offering Extensive distribution platform Resulting in....
Identify Profitable Markets
Management Experience
New editions launch is always backed by prior launch market study...
Aggressive business strategies
Leadership from day one Jaipur - Dec 1996 - No. 1 from the first day of launch Chandigarh/Haryana - May/June 2000 - No. 1 from the first day of launch Ahmadabad - June 2003 - No.1 from the first day of launch Amritsar/Jalandhar - 2006 - No.1 from the first day of launch Source: Company, PINC Research
We expect ad revenue to grow at 20% CAGR over FY10-12, driven mainly by robust volume growth. The companys strong presence in its existing markets (Rajasthan, MP, Gujarat, Haryana and Chhattisgarh) and entry into high-growth ones such as Bihar/Jharkhand enables it to command higher ad rates, which adds significant value to its current business model. Rajasthan, MP and Gujarat contribute ~ 66% to its total ad revenue.
[email protected]
15
RESEARCH
Exhibit 24 - Ad & Circulation growth

Ad (Rs bn) 16000
-12E) (FY06 A G R 0% 6Yr C d - 2 A - 7% lation Circu
Circulation (Rs bn)
12000
8000
4000
0 Mar'06 Mar'07 Mar'08 Mar'09 Mar'10 Mar'11E Mar'12E
Uniformly distributed business model provides multiple growth opportunities DBCL has presence in all major tier II and tier III markets and it has almost covered the Hindi belt. It expanded to 14 new states in the past 14 years (a new state almost every year). Aggressive expansion into new markets such as Jammu, Jharkhand and Bihar, to capture growth opportunities in ex-UP high-growth print markets, will enable the company to lead other competitors, driving robust growth in ad revenue. DBCLs presence across multiples languages, geographies and media platforms differentiates it from competition.
Exhibit 25 - Even distribution of current average daily readership

Punjab + Chandigarh + Haryana 16% Gujarat 24%
Most diversified readership profile...
Rajasthan 37%
MP + Chhattisgarh 23%
[email protected]
16
RESEARCH
Radio business
DBCL has presence in the radio business with 17 stations in seven states (under the brand name My FM). This segment contributed ~3.5% to the top line in FY10. For phase III licenses, the company is well prepared to bid for tier II and tier III cities, where it already has print business operations. Considering that phase III bidding will happen only for classified C and D cities, capex and one-time license fees would be low. We expect the radio segment to grow at 22% CAGR over FY10-12.
Exhibit 26 - Radio Performance

Radio Rev enue (Rs Mn) 120 EBIT margins 0%
Revenue (Rs mn)
90
-20% EBIT % Cash flow from operations (Rs bn)

17
Going forward we expect radio segment to grow at 22% CAGR (FY10-12)...
60
-40%
30
-60%
0 Q3FY09 Q4FY09 Q1FY10 Q2FY10 Q3FY10 Q4FY10 Q1 FY11
-80%
Strong financials to support growth

DBCL is self sufficient for expansion into new regions. It has already undertaken capex of Rs3.5bn over the past two years for upgrade and addition of printing facilities. Strong operating cash flow would ensure steady free cash flow from the business. Over the next two years, we expect capex requirements of ~Rs1bn for new launches (Bihar, Jharkhand and Jammu) and new printing centers in existing territories, with an additional Rs100mn in annual maintenance capex. After factoring in capex requirements of Rs1bn over the next two years, we expect healthy ROE of 27%, ROCE of 35% and FCF of Rs2.4bn by FY12. With revenue CAGR of 16% over FY10-12E, we expect DBCL to maintain its operating margins at 32% and net margins at 19%.
Exhibit 27 - Steady increase in FCF

Free Cash Flow (Rs bn) 38 ROE (%) ROCE (%) 4.0
ROE (%) & ROCE (%)
31
2.0
We expect company to grow FCF/share from Rs3 to Rs13 in FY12E ...
24
0.0
17
(2.0)
10 Mar'06 Mar'07 Mar'08 Mar'09 Mar'10 Mar'11E Mar'12E
(4.0)
RESEARCH
Valuations and Recommendation

DBCLs strategic penetration into high-growth markets, optimum exploitation (its ability to leverage its readership base well) of readership base and a uniformly distributed business model make us positive about the companys growth prospects. Attractive growth opportunities in Hindi/regional print dailies make a strong case for DBCL, as the business model is skewed towards ad revenue (76% of total revenue). At CMP, the stock is trading at 17x FY12E earnings. We initiate coverage with 'BUY' with 12 month target price of Rs315 (21xFY12E EPS).
Exhibit 28 - P/E Chart

(Rs) 310
280
20X
250
18X
220
16X
190 Jan-10 Feb-10 Mar-10 Apr-10 May -10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10
Company Snapshot
DB Corp Limited (DBCL) is one of the most diversified print media groups with presence across the high-growth Hind belt (ex-UP), multi-language dailies, and other verticals of the media business such as radio. The company publishes seven newspapers with 51 editions in three different languages (Hindi, Gujarati and English) across 13 states. It is the secondlargest read newspaper with combined readership of 17.2 mn for Dainik Bhasker, Divya Bhaskar and Saurashtra Samachar. It enjoys leadership position in all its major markets.
Exhibit 29 - Shareholding Pattern (%)

FII 5% DII 3% Others 5% Promoters 87%
RESEARCH
Exhibit 30 - DBCLs top markets

MP Top Dailies ( In Mn)
Dainik Bhaskar Nav a Bharat R108 R208 R109 R209 Q1FY10 Q2FY10 Q3FY10 0% 20% 3.13 3.13 3.06 3.03 3.23 3.20 3.36 40% 60% Nai Dunia Dainik Jagran Raj Ex press R108 R208 R109 R209 Q1FY10 Q2FY10 Q3FY10 0%
Gujarat Top Dailies ( In Mn)

Gujarat Samachar 4.46 4.72 4.76 4.60 4.56 4.51 4.47 20% 40% Div y a Bhaskar 3.54 3.57 3.44 3.36 3.23 3.37 3.58 60% Sandesh 3.60 3.57 3.39 3.23 3.12 3.13 3.38 80% 100%
0.51 0.51 0.57 0.38 0.63 0.93 0.79 0.88 0.98 1.08 0.49 0.52 0.43 0.49 0.52 0.46 0.55 0.46 0.39 0.63 0.39 0.38 0.61 0.350.34 0.62 0.33 0.30 80% 100%
Haryana Top Dailies ( In Mn)

Dainik Bhaskar R108 R208 R109 R209 Q1FY10 Q2FY10 Q3FY10 0% 1.32 1.37 1.34 1.32 1.39 1.40 1.45 20% 40% Dainik Jagran Punjab Kesari 0.93 0.97 0.92 0.91 0.94 0.92 0.93 60% Hari Bhoomi 0.76 0.85 0.86 0.83 0.89 0.96 1.01 80% 0.27 0.29 0.25 0.23 0.27 0.25 0.28 100%
Chhattisgarh Top Dailies ( In Mn)

Dainik Bhaskar R108 R208 R109 R209 Q1FY10 Q2FY10 Q3FY10 0% 1.12 1.10 1.02 1.12 1.06 1.02 0.97 20% 0.69 0.82 0.83 0.78 0.81 40% 60% Nav a Bharat (Mah/Chh) 0.87 0.75 0.77 0.89 0.90 0.85 0.89 80% 0.39 0.38 0.36 0.38 100% Hari Bhoomi 0.82 0.73 Nai Dunia 0.00
Chandigarh Top Dailies ( In Mn)

Dainik Bhaskar Hindustan Times R108 R208 R109 R209 Q1FY10 Q2FY10 Q3FY10 0% 0.22 0.21 0.20 0.18 0.20 0.18 0.17 20% 40% The Tribune The Times of India 0.07 0.07 0.08 0.10 0.10 0.09 0.09 0.09 0.07 0.08 0.11 0.09 0.09 0.08 60% 0.06 0.03 0.06 0.03 0.07 0.08 0.03 0.03 Amar Ujala
Rajasthan Top Dailies ( In Mn)

Rajasthan Patrika R108 R208 R109 R209 Q1FY10 Q2FY10 Q3FY10 0% 7.24 6.57 6.54 6.36 6.59 6.81 7.14 20% 40% 60% Dainik Bhaskar 5.76 5.82 5.74 5.69 6.00 6.12 6.10 80% 100%
0.07 0.03 0.08 0.09 80% 0.02 0.02 100%
RESEARCH

Year Ended March (Figures in Rs mn) Income Statement
Net sales Growth (%) Gross profit Other operating charges EBITDA Growth (%) Depreciation Other income EBIT Interest paid PBT (before E/o items) Tax Provision E/o loss / (Income) Net profit Adj.net profit (Including MI) Growth (%) Diluted EPS (Rs) Diluted EPS Growth (%)
FY08
8,506 27.9 4,205 2,497 1,709 99.8 220 121 1,609 281 1,328 630 698 751 40.1 4 -
FY09
9,490 11.6 4,084 2,731 1,353 (20.8) 290 120 1,183 402 782 423 358 476 (36.6) 3 (36.5)
FY10
10,630 12.0 6,033 2,604 3,429 153.4 378 112 3,163 357 2,806 1,057 1,749 1,828 283.9 10 254.4
FY11E
12,373 16.4 6,808 2,745 4,063 18.5 442 135 3,756 175 3,581 1,235 2,347 2,382 30.3 13 30.3
FY12E
14,345 15.9 7,863 3,237 4,625 13.8 462 120 4,283 172 4,111 1,377 2,734 2,734 14.8 15 14.8
Cash Flow Statement

Pre-tax profit Depreciation Total tax paid Chg in working capital Other operating activities Cash flow from oper. (a) Capital expenditure Chg in investments Other investing activities Cash flow from inv. (b) Free cash flow (a+b) Equity raised/(repaid) Debt raised/(repaid) Change in Minorities Interest Dividend (incl. tax) Other financing activities Cash flow from fin. (c) Net chg in cash (a+b+c)
FY08
1,320 220 (345) 674 363 2,232 (1,484) 45 (1,439) 793 139 (341) (2) (384) (588) 205
FY09
782 290 (357) 122 313 1,150 (2,845) 168 (2,677) (1,527) 2,011 (99) (395) 1,517 (10)
FY10
2,806 378 (1,013) (174) 387 2,384 (596) (1,298) (1,895) 489 2,690 (2,268) (258) (396) (232) 257
FY11E
3,581 442 (1,235) (614) 133 2,308 (600) 55 (545) 1,763 (1,000) (618) (175) (1,793) (30)
FY12E
4,111 462 (1,377) (407) 172 2,961 (600) (600) 2,361 (500) (721) (172) (1,393) 968
Balance Sheet
Equity Share capital Reserves & surplus Shareholders' funds Minorities interests Total Debt Capital Employed Net fixed assets Net Other Current Assets Cash & Cash Eq. Investments Net Deferred Tax Assets Total assets
FY08
1,688 510 2,198 242 3,436 5,876 3,623 1,723 808 68 (346) 5,876
FY09
1,688 889 2,577 124 5,631 8,332 6,471 1,564 452 238 (393) 8,332
FY10
1,828 4,659 6,487 44 3,207 9,739 6,475 1,717 1,950 205 (609) 9,739
FY11E
1,828 6,423 8,251 2,207 10,458 6,633 2,205 1,920 150 (450) 10,458
FY12E
1,828 8,436 10,264 1,707 11,971 6,771 2,613 2,888 150 (450) 11,971
Key Ratios
OPM (%) Net margin (%) Yield (%) Net debt/Equity (x) Net Working Capital (days) Asset turnover (x) ROCE (%) RoE (%) EV/Net sales (x) EV/EBITDA (x) PER (x) Price/Book (x)
FY08
20.1 8.7 0.2 1.2 107 2.1 25.9 34.2 5.3 26.6 57.1 20
FY09
14.3 5.0 0.2 1.9 69 2.0 13.6 18.5 5.1 35.5 90.0 17
FY10
32.3 17.0 0.8 0.2 122 1.5 30.6 28.2 4.5 13.9 25.4 7
FY11E
32.8 19.0 1.2 0.0 122 1.5 34.4 28.9 3.8 11.5 19.5 6
FY12E
32.2 18.9 1.4 (0.1) 140 1.6 34.5 26.6 3.2 9.8 17.0 5
1-Year rolling forward P/E Band
FCF/Share
(Rs) 310 280 250 220 190 Aug-10 Feb-10 Mar-10 May-10 Sep-10 Apr-10 Jan-10 Jun-10 Oct-10 Jul-10
20X
15.0 10.0 5.0

18X
0.0
16X
-5.0 -10.0 FY11E FY12E

20
FY07
FY08
FY09
[email protected]
FY10
RESEARCH
JAGRAN PRAKASHAN LTD.

Numero Uno in UP, the largest print market Jagran Prakashan's (JPL) key strength is its leading position in the UP market with a 49% share in total readership. It leads by 37% in readership vs. its closest competitor. UP is the largest Hindi print market with a readership base of 19.6mn (28% of total Hindi readership in India) and Hindi ad print share of 31% of the total market of ~ Rs2.6bn. UP recorded economic growth at 11% over FY04-08. We believe JPL will continue to be the undisputed leader in the buoyant state, capitalizing on accelerated growth opportunities. Well-built business model JPL expanded into other media verticals such as event mgmt, OOH, and bilingual papers (I-Next and Cityplus) and the print business of Mid-Day Multimedia. We believe diversification beyond its main print business will enable the company to capture growth opportunities in other forms of media businesses. We expect this segment to grow at FY10-12 CAGR of 25% to Rs1.4bn.
STOCK DATA
Market Cap Book Value per share Eq Shares O/S (F.V. Rs2) Free Float Avg Traded Value (6 mnths) 52 week High/Low Bloomberg Code Reuters Code [email protected] Ronak Bakshi +91-22-6618 6411 [email protected]

07 December 2010
Initiating Coverage
Strong business growth assuring healthy financials With leadership in the Hindi print market, the company's ad and circulation revenue grew at a 3yr CAGR of 18% and 8% respectively, during when the economy grew at 8%. JPL delivered healthy revenue CAGR of 17% CAGR over FY07-10. It delivered strong return ratios with ROE and ROCE at 29% and 34% respectively as of FY10. We expect the company to record FY10-12 revenue and PAT CAGR of 20% and 22% respectively. Considering cost efficiency measures, improving profitability from emerging businesses of I-Next and City plus, and stable interest cost, we estimate OPM at 32% and NPM at 19% for the next 2yrs. VALUATIONS AND RECOMMENDATION At CMP, the stock trades at 16x FY12E EPS (after incorporating Mid-Day numbers). Considering that JPL is the largest player in terms of readership , with better cost efficiency, phased and planned expansion into other forms of media businesses, and a wider portfolio (including Mid-Day), we have a positive outlook on the company and believe it is well poised to benefit from steady growth in the print media sector. We initiate coverage on JPL with a 12-month target price of Rs165 (20x FY12E earnings).
Rs40.8bn. Rs20.3 301mn. 45% Rs50.8mn Rs157/104 JAGP IN JAGP.BO
TOP SHAREHOLDERS
Name % holding 2.1 1.8 1.8 1.8 1.5 HDFC Trustee Co. Ltd - HDFC Eq. Fund Rajni Gupta Siddhartha Gupta Matthews India Fund Franklin Templeton Investment Funds
PERFORMANCE (%)
Absolute Relative 1M 3.4 6.1 3M 9.1 0.8 12M 15.7 0.3
KEY FINANCIALS
FY08 Net Sales YoY Gr. (%) Op. Profit Op. Margin (%) Adj. Net Profit YoY Gr. (%) 7,496 25.3 1,640.0 21.9 982.9 33.7 3.3 22.6 18.2 41.4 5.5 25.0 FY09 8,234 9.8 1,567.2 19.0 916.4 (6.8) 3.0 18.7 16.4 44.4 5.0 26.3 FY10 9,419 14.4 2,822.5 30.0 1,758.7 91.9 5.8 33.6 28.7 23.1 4.4 14.5 FY11E 11,422 21.3 3,685.5 32.3 2,253.9 28.2 7.1 34.2 27.5 18.9 3.7 11.4
Rs mn FY12E 13,643 19.4 4,342.4 31.8 2,607.9 15.7 8.2 32.2 24.7 16.4 3.0 9.5
Jagran Prakashan 200 150 100 50 0 Nov -09 BSE (Rebased)
KEY RATIOS
Dil. EPS (Rs) ROCE (%) ROE (%) PER (x) EV/Sales (x) Ev/EBDITA (x)
Feb-10
May -10
Aug-10
Nov -10
21
RESEARCH
Jagran Prakashan
Numero Uno in UP, the largest print market

JPL continues to be the largest read newspaper in the country with total readership of 54mn (Q3FY10 IRS). It is widely present in the major speaking Hindi market, covering 11 states out of 14. JPLs key strength is its leading position in the UP market, where it commands 49% share in total readership. It leads by 33% in readership vs. its closest competitor. UP/Uttarakhand is the largest Hindi print market with readership base of 19.6mn (28% of total Hindi readership in India) and Hindi ad print share of 31% of the total market of ~ Rs2.6bn. UP/Uttarakhand recorded economic growth at 11% and 8.8% over FY04-08 respectively. The company has no plans to expand into any region/market and would consolidate its position in its existing markets. We believe JPL will continue to be the undisputed leader in the buoyant state of UP, capitalizing on accelerated growth opportunities.
Exhibit 31 - UP/ UK - the largest print readership

24 19.3 18
Largest player in the largest print market - UP (28% share of total Hindi readership in India)...
Readership (Mn)
12 7.3 6 6.4 3.7 3.0 0.4 0 UP / Uk Bihar Delhi Hary ana Jharkhand Chandigarh
Exhibit 32 - UP/ UK - largest Hindi Advertising market

Others 10% Delhi 8%
UP & UK 31%
UP & Uttarakhand account for 31% of Hindi print ad spend in the country...
Punjab 10%
Bihar & Jharkhand 11% MP 13% Source: Company, PINC Research Rajasthan 17%
[email protected]
22
RESEARCH
Jagran Prakashan
Exhibit 33 - UP / UK High Purchasing Power

360 315 312 301 236
Purchasing Power (Rs. Bn)
270
180
143 113
90
0 Delhi (reported) Punjab / Hary ana

UP / UK
Rajasthan
MP / Chattisgarh
Bihar / Jharkhand
Exhibit 34 - Robust economic growth in present markets

16.0% 14.5% 12.9% 12.0% CAGR (FY04-08) 8.0% 12.6% 12.0% 11.4% 12.4% 11.0% 8.8%
Robust economic growth seen in all the major JPLs market...
4.0% 0.0% Hary ana Bihar Delhi Chandigarh Jharkhand Uttarakhand Uttar Pradesh CAGR (FY04-08) of per capita Net State Domestic Product All India
Consolidation in current markets: JPL intends to capture maximum growth

opportunities through consolidation in its current markets unlike other players that are expanding into newer geographies. It would continue to focus on gaining readership in markets where it already has presence.
Exhibit 35 - Readership Strength

Main States (IRS Q3FY10) Uttar Pradesh Bihar Haryana Punjab Jharkhand Uttaranchal Madhya Pradesh Himachal Pradesh Chhattisgarh Jammu & Kashmir Source: IRS, PINC Research [email protected] JPL Readership (000s) 8,945 2,527 927 802 823 586 296 36 42 26 Competitor (largest player/ next big player) Amar Ujala Hindustan Danik Bhaskar Punjab Kesari Hindustan Amar Ujala Danik Bhaskar Amar Ujala Danik Bhaskar Amar Ujala Competitor (largest player/ next big player) readership (000s) 6,749 4,515 1,446 1,078 1,630 805 3,357 390 971 110 % gap 33% 79% 56% 34% 98% 37% 1034% 983% 2212% 323%
23
RESEARCH
Jagran Prakashan
I-Next and City Plus catering to niche segments JPL also launched I-Next (bi-lingual) and City Plus (weekly tabloid) for young readers, addressing the niche segment of advertising. Currently, these tabloids contribute less than 10% to total revenue.
Exhibit 36 - I-Next & City Plus Editions

I-Next Editions
Kanpur Lucknow Meerut
City Plus Editions

East Delhi South Delhi Central Delhi Dwarka Gurgaon Faridabad Noida New Ghaziabad Greater Noida Koramangala (Bangalore) Indiranagar (Bangalore) Jayanagar (Bangalore) Sarjapur (Bangalore) HSR Layout (Bangalore) Hyderabad Vashi (Mumbai) Ghaziabad Aundh Baner (Pune) Wanowire (Pune) Kothrud (Pune) Deccan (Pune)
I Next & City Plus catering to niche segment advertisers...
Agra Allahabad Varanasi Dehradun Patna Ranchi Jamshedpur Source: Company, PINC Research
Well-built business model

JPL also expanded into other media verticals such as event management, outdoor media, and bilingual newspapers (I-Next and City Plus) and it acquired the print business of MidDay Multimedia. We believe diversification beyond its main print business will enable the company to capture growth opportunities in other forms of media businesses. Currently, this segment contributes ~10 % to the top line (excluding revenue from Mid-Days print business). We expect this segment to grow at FY10-12 CAGR of 25% to Rs1.4bn.
Exhibit 37 - Revenue share (%)

Jagran Ad 120% Mid-day Ad Jagran Circulation Mid-day circulation Others(Ev ent Mgt, OOH etc)
90%
Revenue growth emanating from all the business segments ...
60%
30%
0% FY07
FY08
FY09
FY10
FY11E
FY12E
[email protected]
24
RESEARCH
Jagran Prakashan
Strong business growth

With leadership in the Hindi print market, JPLs ad and circulation revenue grew at a fouryear CAGR of 20% and 7% respectively, during when the economy grew at 8%. Economic revival, healthy volume growth, and pricing power over competitors will likely result in healthy two-year revenue CAGR of 20%, led by ad revenue CAGR of 25% (including Mid-day financials).
Exhibit 38 - JPL Revenue structure

Ad 16
0% -10) 2 (FY06 06-10) 7% R r CAG AGR (FY C ue 4Y reven enue 4Yr AD ev tion r la Circu
Circulation
Others
12 Rs Bn
0 FY06 FY07 Fy 08 FY209 FY10 FY11E FY12E
Acquisition of Mid-Days print business

Acquisition of Mid-Day Multimedias print (in the form of 2:7 share swap deal of Rs1.75bn, resulting in share dilution of 5% for JPL) business will give JPL access to markets such as Mumbai, Delhi, Bangalore and Pune and would place it on par with other players that have presence in both Hindi and English newspapers (HT Media The Hindustan and Mint and DB Corp Dainik Bhaskar and DNA). We believe this acquisition would enable JPL to expand its presence in the western markets (Mumbai and Gujarat) where Mid-Day has strong presence in dailies. Mid-Day would contribute 7% to JPLs top line in FY12E and would be EPS accretive.
We believe this acquisition will expand JPLs presence in the western markets...
Blackstone deal to support inorganic growth

Blackstone acquisition will provide strong cash balance... Blackstone, the US-based PE group, acquired 12.75% of Jagran Media Network (JPLs holding company) for Rs2.25bn; this will provide strong cash balance (cash and investments as of 30 Sept 2010 are Rs2.4bn) to JPL for inorganic expansion.
[email protected]
25
RESEARCH
Jagran Prakashan
Strong financials
We expect OPM to expand 32% during FY10-FY12E ... JPL achieved healthy revenue CAGR of 18% over FY07-10. It delivered strong return ratios with ROE and ROCE at 29% and 34% respectively as of FY10. We believe that the company would achieve revenue and PAT CAGR of 20% and 22% over FY10-12 respectively. Considering cost efficiency measures and improving profitability from emerging businesses of I-Next and City Plus, we expect OPM at 32% and NPM at 19% over the next two years.
Exhibit 39 - Financial performance

EBITDA (LHS) 5,000 4,000 3,000 18 2,000 1,000 FY07
OPM % (RHS)
NPM % (RHS) 36
27
0 FY08 FY09 FY10 FY11E FY12E
Exhibit 40- ROE & ROCE performance

ROE 42 ROCE
34
26
18
10 FY07 FY08 FY09 FY10 FY11E FY12E
[email protected]
26
RESEARCH
Jagran Prakashan

We initiate coverage on JPL with a BUY recommendation ... At CMP, the stock trades at 15.5x FY12E EPS. Considering that JPL is the largest player in terms of readership (for the past 14 IRS rounds), with better cost efficiency, phased and planned expansion into other forms of media businesses, and a wider portfolio (including Mid-day), we are positive about its business model and believe it is well poised to benefit from steady growth in the print media sector. We initiate coverage on JPL with a BUY recommendation and a 12-month target price of Rs165 (20x FY12E earnings).
Exhibit 41 - P/E Chart

(Rs) 200 160 120 80 40 0 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Jul-06 Jul-07 Jul-08 Jul-09 Nov-06 Nov-07 Nov-08 Nov-09 Jul-10 Nov-10
20X 18X 16X 14X
Company Profile
Jagran Prakashan Limiteds (JPL) newspaper daily, Dainik Jagran, is the largest read daily with total readership of 54mn (Q3FY10 IRS). It circulates around 3mn copies per day. The companys main markets are UP, Uttarakhand, Bihar, Jharkhand, Punjab, Haryana and Delhi. It has also diversified into other media platforms such as event management, OOH, I-Next and City Plus. The company entered the English daily market in the western region with its recent acquisition of Mid-Days print business.
Exhibit 42- Shareholding Pattern (%)

Others 16%
DII 19%
Promoters 55%
FII 10% Source: Company, PINC Research
[email protected]
27
RESEARCH
Jagran Prakashan
Exhibit 43 - JPLs Top Markets

UP Top Dailies (In Mn)
Dainik Jagran R108 R208 R109 R209 Q1FY10 Q2FY10 Q3FY10 0% 9.16 9.19 9.14 9.07 9.07 8.85 8.95 20% 40% Amar Ujala Hindustan 6.14 6.17 6.28 6.38 6.52 6.53 6.75 60% 80% 2.15 2.19 2.31 2.35 2.60 2.92 3.19 100% R108 R208 R109 R209 Q1FY10 Q2FY10 Q3FY10 0%
Delhi Top Dailies (In Mn)

Nav bharat Times 1.66 1.54 1.57 1.59 1.69 1.72 1.80 20% 40% Hindustan Punjab Kesari 0.95 1.10 1.26 1.18 1.19 1.16 1.16 60% Dainik Jagran 0.61 0.58 0.62 0.65 0.65 0.66 0.70 100%
0.86 0.73 0.77 0.77 0.75 0.75 0.69 80%
Bihar+Jharkhand Top Dailies (In Mn)

Hindustan R108 R208 R109 R209 Q1FY10 Q2FY10 Q3FY10 0% 20% 5.55 5.78 5.59 5.53 5.83 5.76 6.15 40% 60% Dainik Jagran Prabhat Khabar 3.61 3.37 3.21 3.16 3.38 3.31 3.35 80% 1.22 1.17 1.17 1.20 1.15 1.23 1.35 100%
Punjab Top Dailies (In Mn)

Ajit R108 R208 R109 R209 Q1FY10 Q2FY10 Q3FY10 0% Punjab Kesari 1.15 1.06 1.04 1.13 1.06 1.13 1.13 20% Jag Bani 1.15 1.07 1.04 1.11 1.15 1.10 1.08 40% Dainik Jagran 1.07 1.05 0.97 1.12 1.03 1.02 0.99 60% 0.99 0.93 0.87 0.97 0.96 0.89 0.80 80% Dainik Bhaskar 0.57 0.71 0.83 0.89 0.83 0.77 0.81 100%
Haryana Top Dailies (In Mn)

Dainik Bhaskar Amar Ujala R108 R208 R109 R209 Q1FY10 Q2FY10 Q3FY10 0% 1.32 1.37 1.34 1.32 1.39 1.40 1.45 20% 40% Dainik Jagran Hari Bhoomi 0.93 0.97 0.92 0.91 0.94 0.92 0.93 60% 0.76 0.85 0.86 0.83 0.89 0.96 1.01 80% 0.180.27 0.17 0.29 0.19 0.25 0.23 0.23 0.25 0.27 0.23 0.25 0.23 0.28 100% Punjab Kesari
Uttaranchal Top Dailies (In Mn)

Amar Ujala R108 R208 R109 R209 Q1FY10 Q2FY10 Q3FY10 0% 0.85 0.83 0.82 0.82 0.85 0.83 0.81 20% 40% 60% 0.60 0.62 0.61 0.59 80% Dainik Jagran Hindustan 0.51 0.56 0.54 0.14 0.19 0.19 0.22 100%
RESEARCH
Jagran Prakashan Ltd.

Net sales Growth (%) Gross profit Other operating charges EBITDA Growth (%) Depreciation Other income EBIT Interest paid PBT (before E/o items) Tax Provision E/o loss / (Income) Net profit Adj. net profit (Including MI) Growth (%) Diluted EPS (Rs) Diluted EPS Growth (%)
FY08
7,496 25.3 3,865 2,225 1,640 36.9 336 215 1,519 60 1,459 476 983 983 33.7 3.3 33.7
FY09
8,234 9.8 3,990 2,423 1,567 (4.4) 383 227 1,411 59 1,352 436 916 916 (6.8) 3.0 (6.8)
FY10
9,419 14.4 5,470 2,648 2,823 80.1 507 343 2,658 66 2,592 833 1,759 1,759 91.9 5.8 91.9
FY11E
11,422 21.3 6,554 2,869 3,685 30.6 519 249 3,416 56 3,360 1,106 2,254 2,254 28.2 7.1 22.1
FY12E
13,643 19.4 7,559 3,217 4,342 17.8 600 249 3,992 70 3,922 1,314 2,608 2,608 15.7 8.2 15.7
Cash Flow Statement

FY08
1,457 336 (420) (354) 159 1,178 (730) (340) 159 (911) 268 (271) (352) (60) (683) (416)
FY09
1,352 383 (413) (125) 59 1,257 (1,319) 378 34 (907) 349 580 (352) 56 284 633
FY10
2,592 507 (749) (259) 22 2,113 (454) 22 45 (387) 1,726 (129) (1,409) (55) (1,593) 133
FY11E
3,360 519 (1,106) (432) 56 2,397 (1,300) (150) (1,450) 947 (214) (1,405) (56) (1,645) (698)
FY12E
3,922 600 (1,314) (274) 70 3,004 (1,500) (250) (1,750) 1,254 (1,553) (70) (1,623) (369)
Balance Sheet
FY08
602 4,785 5,388 791 6,178 3,046 1,462 367 1,833 (531) 6,177
FY09
602 4,997 5,599 1,415 7,014 3,990 1,149 828 1,568 (521) 7,014
FY10
602 5,523 6,125 1,214 7,339 3,941 1,460 852 1,666 (580) 7,339
FY11E
632 7,566 8,198 1,000 9,198 4,722 1,892 1,569 1,816 (801) 9,198
FY12E
632 9,933 10,565 1,000 11,565 5,622 2,166 2,531 2,066 (820) 11,565
Key Ratios
OPM (%) Net margin (%) Yield (%) Net debt/Equity (x) Net Working Capital (days) Asset turnover (x) ROCE (%) RoE (%) EV/Net sales (x) EV/EBITDA (x) PER (x) Price/Book (x)
FY08
21.9 12.7 1.5 0.08 89 1.9 22.6 18.2 5.5 25.0 41.4 8
FY09
19.0 10.8 1.5 0.10 88 1.7 18.7 16.4 5.0 26.3 44.4 7
FY10
30.0 18.0 2.6 0.06 90 1.7 33.6 28.7 4.4 14.5 23.1 7
FY11E
32.3 19.3 2.8 (0.07) 111 1.7 34.2 27.5 3.7 11.4 18.9 5
FY12E
31.8 18.8 3.1 (0.14) 126 1.7 32.2 24.7 3.0 9.5 16.4 4
1-Year rolling forward P/E Band
FCF/Share
(Rs) 175 140 105 70 35 0 Dec-07 Oct-06 Sep-09 Feb-09 Mar-06 Apr-10 Jul-08 May-07 Nov-10
20X 18X 16X 14X
6.0 5.0 4.0 3.0 2.0 1.0 0.0 FY11E FY12E

29
FY07
FY08
FY09
[email protected]
FY10
RESEARCH
HINDUSTAN MEDIA VENTURES LTD.

Fastest-growing print media company, achieving a strong readership base Hindustan Media Ventures Ltd. (HMVL) is the fastest-growing Hindi news daily with readership base growth of 18.5% (2007-10) and ad revenue growth of 33% during FY07-10. Its aggressive approach has enabled it to move from the sixth position (2005) to third largest in terms of readership (2009). HMVL has a dominant position in Bihar (readership of 4.5mn in Q3FY10 - IRS), is strong in Delhi NCR (No. 2 player), and is gaining strength in UP/Uttarakhand; IRS data suggests that during 2007-10, HMVL grew 15.2% while Jagran Prakashan declined 2% and Amar Ujala grew only 2.5%. HMVLs rising readership base and improved yields resulted in revenue growth of 26% and ad revenue CAGR of 32.5% over FY0710 (~2x that of listed competitors).
[email protected] Ronak Bakshi +91-22-6618 6411 [email protected]

07 December 2010
STOCK DATA
Market Cap Book Value per share Eq Shares O/S (F.V. Rs10) Free Float Avg Traded Value (6 mnths) 52 week High/Low Bloomberg Code Reuters Code Rs12.1bn. Rs13.2 73mn. 22% Rs116.4mn Rs220/131 HMVL IN HINS.BO
Initiating Coverage
Steady operational cost and high operating leverage to significantly drive profitability We estimate HMVLs ad revenue CAGR at 26% over FY10-12, based on its leadership position in the high-growth state, Bihar, and increasing penetration in the largest print market, UP. With steady operational cost and high operating leverage (RM/sales 40% vs. Jagran Prakashans 30% and DB Corps 31%), the companys EBIDTA would grow at 30% CAGR and PAT would grow at 35% CAGR over FY10-12E. VALUATIONS AND RECOMMENDATION We expect revenue and PAT to grow at 18% and 35% CAGR respectively over FY10-12. At CMP, the stock trades at 14x FY12E EPS (steep discount to current valuations of JPL and DBCL). We initiate coverage on the stock with BUY recommendation and 12 month target price of Rs200 (17x FY12E EPS) - maintaining current discount to the valuation (targeted P/E) of DBCL (21x FY12E EPS) and to the valuation (targeted P/E) of JPL (20x FY12E EPS).
TOP SHAREHOLDERS
Name Azim Hasham Premji DSP Blackrock India TIGER Fund HDFC MF Monthly Inc. Long Term Plan Reliance Equity Opportunities Fund Reliance Monthly Income Plan % holding 1.1 1.2 1.1 2.6 2.3
PERFORMANCE (%)
Absolute Relative 1M (8.6) (6.2) 3M (10.5) (17.3) 4M (14.5) (21.2)
KEY FINANCIALS
FY08 Net Sales YoY Gr. (%) Op. Profit Op. Margin (%) Adj. Net Profit YoY Gr. (%) 168 5.6 8.5 5.1 0.5 (46.0) 0.9 5.4 0.6 3.8 74.8 FY09 176 4.8 5.3 3.0 0.8 43.2 0.3 2.7 0.7 6.4 213.9 FY10 1,623 820.8 246.4 15.2 154.0 19,654.3 2.7 23.9 35.8 6.4 42.2 FY11E 5,236 222.6 972.2 18.6 577.0 274.6 7.9 20.8 15.5 20.7 1.9 10.4
Rs mn FY12E 6,151 17.5 1,350.7 22.0 854.3 48.1 11.6 27.0 20.1 14.0 1.6 7.5
HMVL BSE (Rebased)
350 280 210 140 70 Jul-10
KEY RATIOS
Aug-10
Oct-10
Nov -10
30
RESEARCH
Hindustan Media Ventures Ltd.
Fastest-growing print media company, achieving a strong readership base HMVL is the fastest-growing print media company with readership base growth of 18% to 10 mn (average daily readership), circulation growth of 14% to 1.54 mn copies per day, and ad revenue growth of 33% to Rs4.6bn during 2007-10.
Exhibit 44 - Hindustan has consistently improved its position in the industry Readership Ranking
Ranking improved from sixth largest read paper to third largest paper...
2005 1 2 3 4 5 6 Source: Company, PINC Research 2007 1 2 3 4 5 6 2009 1 2 3 4 5 6
UP/Uttarakhand market The companys growth is mainly attributed to traction in the UP and Uttarakhand markets, where it is the third-largest player with a readership base of 2.92 mn (average daily readership). UP and Uttarakhand are the largest regional print markets in India (Rs8bn), where HMVL has a market share of 10%. The companys ad CAGR in UP/Uttarakhand was 60% over FY07-10. HMVL has undertaken a majority of investments in UP/Uttarakhand, which currently contributes 26% to its total ad revenue; we expect the companys profitability to improve significantly as its UP/Uttarakhand business is already close to breaking even.
Exhibit 45 - Fastest growing newspaper in UP/Uttarakhand

Dainik Jagran 12 10.29 10.02 9.89 Amar Ujala 9.91 7.14 Hindustan 9.68 7.13
Readership (in Mn)
9 6.63 6 2.19 2.49 6.72 6.97
Hindustan grew by 15.2% over FY07-10 whereas JPL de-grew by -2% in UP market...
2.04
2.78
3.11
0 2007 R2
Growth (07-10) Source: IRS, PINC Research
2008 R2
Dainik Jagran (2.0%)
2009 R2
Amar Ujala 2.5%
2010 Q1
2010 Q2
Hindustan 15.2%
[email protected]
31
RESEARCH
Bihar/Jharkhand market HMVL is a dominant player in this region and has been at a pole position for the past 25 years with a readership base of 5.76mn (61% share in average daily readership). HMVLs Bihar ad revenue grew at a 28% CAGR over FY07-FY10 and it is highly profitable. We believe that even after the entry of Dainik Bhaskar and stiff competition from Dainik Jagran, HMVL will maintain its dominance in the market and enjoy accelerated ad revenue growth.
Exhibit 46- Dominant player in Bihar

Hindustan 10Q3 10Q2 Dainik Jagran Prabhat Khabar
Hindustan has the highest readership share in Bihar-61 % of the total Hindi readership...
Readership (mn)
10Q1 09R2 08R2 07R2
Exhibit 47- Dominant player in Jharkhand

Hindustan 10Q3 10Q2 Readership (mn) 10Q1 09R2 08R2 07R2 Dainik Jagran Prabhat Khabar
Delhi NCR HMVL is second-largest player in Delhi NCR with a readership base of 1.3mn as of Q2FY10 (27% share in average readership). The companys ad revenue in the region grew at a robust 26% CAGR over FY07-10. Following market growth factors would support high ad revenue growth for HMVL in the region: 1) daily readership higher for Hindi newspapers than English; 2) Low readership as a percentage of literates (~30%); 3) Robust economic growth (12.6%).
[email protected]
32
RESEARCH
Robust Ad revenue growth

Rising readership and improved yields for HMVL resulted in revenue growth of 26% and ad revenue CAGR of 32.5% over FY07-10 (2x that of other listed competitors). We expect ad revenue to grow at 25% CAGR over FY10-FY12, mainly driven by the companys dominant leadership in Bihar/Jharkhand, strong growth in the largest print ad market, UP/Uttarakhand, and expanding business in Delhi NCR.
Exhibit 48- HMVL Ad Rev Breakup (%)

JK 13.5%
Bihar 34.7%
Mkt Share 37%
Delhi/Chandigarh 25.6% Mkt Share 16%
UP/UK 26.3% Source: Company, PINC Research
Mkt Share 10%
Exhibit 49- Growth across all its markets

Ad Rev enue CAGR (FY 07-10) 80.0% 60.4% CAGR (FY07-10) 60.0%
Ad Revenue CAGR of 33% (FY07-10) driven by significant growth across all its markets ...
40.0%
33.6%
28.6%
25.2%
20.0%
0.0% Total Ad.

Bihar/Jharkhand
Delhi/Chandigarh
UP/UK
[email protected]
33
RESEARCH
Financials
We estimate HMVLs ad revenue CAGR at 26% over FY10-12, based on its leadership position in the high-growth state, Bihar, and increase in penetration in the largest print market, UP. With steady operational cost and high operating leverage (RM/sales 40% vs. Jagran Prakashans 30% and DB Corps 31%) HMVLs EBIDTA would grow at 30% CAGR and PAT would grow at 35% CAGR over FY10-12E.
Exhibit 50- Hindustan Financials (Rs mn)

FY07 Ad revenue Circulation Scrap/others Gross Sales Other income Total Income Total Expenditure Raw Material Employee Expenses EBIDTA (Excl. Other Income) EBIDTA (Incl. Other Income) Interest Gross Profit Depreciation Profit Before Tax & EO Items Profit Before Tax Tax Net Profit OPM% NPM% Ad Growth (yoy) Circulation growth (yoy) Source: HMVL RHP, PINC Research 1,274 883 19 2,176 4 2,180 2,260 1,208 314 (84) (80) 13 (93) 84 (176) (176) (49) (127) (3.86) (5.83) FY08 1,652 973 25 2,649 8 2,658 2,540 1,316 348 110 118 16 102 87 15 15 7 8 4.15 0.30 30% 10% FY09 2,440 1,051 36 3,527 10 3,537 3,393 1,738 464 134 143 51 92 122 (30) (30) 0 (30) 3.79 (0.86) 48% 8% FY10 2,964 1,208 216 4,388 55.67 4,443 3,576 1,733 567 812 868 65 803 126 676 676 211 465 18.50 10.47 21% 15% FY11E 3,838 1,181 217 5,236 71 5,307 4,264 2,220 640 972 1,043 49 994 157 837 837 260 577 18.57 10.87 29% (2%) FY12E 4,730 1,154 267 6,151 115 6,266 4,801 2,560 707 1,351 1,466 32 1,434 177 1,256 1,256 402 854 21.96 13.63 23% (2%)
Exhibit 51- Operational performance

Raw Material % of Sales 60.0 OPM %
Decline in RM/Sales (%) resulted in OPM improvement...
40.0
20.0
0.0 FY07 FY08 FY09 FY10
-20.0
RESEARCH
Exhibit 52- RM/Sales (%)

DBCL JPL HMVL HTML
Increased business growth both in circulation and ad revenue has led RM/Sales to drop from 56% (FY07)to 40% (FY10) thus leading to an OPM expansion of 18.5% in FY10 from 3.7%(FY07) ...
60 50
40 30 20 FY07
FY08
FY09
FY10
Exhibit 53- Operating Margins (%)

Jagran 40 30 20 10 0 FY11E -10 FY12E 21.00 14.00 NPM (%)
35
DBCL
HMVL
FY07
FY08
FY09
Exhibit 54- PAT and NPM

PAT 1200 900 PAT (Rs Mn) 600 7.00 300 0 FY11E -300 FY12E FY07 FY08 FY09 FY10 0.00 NPM (%)
FY10
-7.00
RESEARCH

We initiate coverage on the stock with BUY recommendation and 12 month target price of Rs200... We expect revenue and PAT to grow at 18% and 35% CAGR respectively over FY10-12. At CMP, the stock trades at 14x FY12E EPS (steep discount to current valuations of JPL and DBCL). We initiate coverage on the stock with BUY recommendation and 12 month target
price of Rs200 (17x FY12E EPS) - maintaining current discount to the valuation (targeted P/E) of DBCL (21x FY12E EPS) and to the valuation (targeted P/E) of JPL (20x FY12E EPS).
Reasons for discounted valuations: Competition from DBCL in Bihar and Jharkhand. We believe its impact to be seen in coming years. Performance in UP market - though the company is performing well in the UP market, we are skeptical on the growth going forward in UP market because of the competition from JPL (the largest player in UP). Hence we believe current discount to the valuation of HMVL with respect to DBCL (18% on 17xFY12E EPS) and JPL (15% on 16.5xFY12E EPS) to prevail going forward.
Company Profile
Hindustan Media Ventures Limited (HMVL) is one of the leading print media companies involved in printing and publishing of Hindustan (the third-largest newspaper daily in India) and two Hindi magazines, Nandan, a childrens magazine, and Kadambini, a general magazine. HMVL has strong regional presence with readership of more than 10 mn (Source: IRS Q3FY10). The company enjoys leadership in Bihar and Jharkhand and it is consolidating its second position in Delhi and third position in UP and Uttarakhand.

FII 1%
Promoters 78%
DII 17%
Others 4%
[email protected]
36
RESEARCH
Exhibit 56 - HMVLs Top Markets

Jharkhand Top Dailies (In Mn)
Hindustan R108 R208 R109 R209 Q1FY10 Q2FY10 Q3FY10 0% 10% 1.16 1.22 1.25 1.20 1.35 1.47 1.63 20% 30% 40% 50% Prabhat Khabar 0.97 0.92 0.98 1.00 0.98 1.00 1.13 60% 70% 80% Dainik Jagran 0.85 0.87 0.80 0.78 0.85 0.80 0.82 90% 100%
UP Top Dailies (In Mn)

Dainik Jagran R108 R208 R109 R209 Q1FY10 Q2FY10 Q3FY10 0% 10% 9.16 9.19 9.14 9.07 9.07 8.85 8.95 20% 30% 40% 50% 60% Amar Ujala 6.14 6.17 6.28 6.38 6.52 6.53 6.75 70% 80% Hindustan 2.15 2.19 2.31 2.35 2.60 2.92 3.19 90% 100%
Bihar Top Dailies (In Mn)

Hindustan R108 R208 R109 R209 Q1FY10 Q2FY10 Q3FY10 0% 10% 20% 4.38 4.56 4.34 4.33 4.48 4.29 4.52 30% 40% 50% 60% 70% Dainik Jagran 2.76 2.51 2.41 2.38 2.53 2.51 2.53 80% 90% 100%
RESEARCH

Net sales Growth (%) Gross profit Other operating charges EBITDA Growth (%) Depreciation Other income EBIT Interest paid PBT (before E/o items) Tax Provision E/o loss / (Income) Net profit Adj. net profit (Including MI) Growth (%) Diluted EPS (Rs) Diluted EPS Growth (%)
FY08
168 5.6 66 57 9 3.7 4 1 5 5 1 3 1 1 (46.0) 0.9 7.4
FY09
176 4.8 69 64 5 (38.0) 4 1 3 3 1 1 1 1 43.2 0.3 (68.6)
FY10
1,623 820.8 713 466 246 4,555.0 25 47 268 37 230 76 154 154 19,654.3 2.7 805.8
FY11E
5,236 222.6 2,376 1,404 972 294.5 157 71 886 49 837 260 577 577 274.6 7.9 191.6
FY12E
6,151 17.5 2,885 1,534 1,351 38.9 177 115 1,288 32 1,256 402 854 854 48.1 11.6 48.1
Cash Flow Statement

FY08
1,457 336 (420) (354) 159 1,178 (730) (340) 159 (911) 268 (271) (352) (60) (683) (416)
FY09
1,352 383 (413) (125) 59 1,257 (1,319) 378 34 (907) 349 580 (352) 56 284 633
FY10
2,592 507 (749) (259) 22 2,113 (454) 22 45 (387) 1,726 (129) (1,409) (55) (1,593) 133
FY11E
3,360 519 (1,106) (432) 56 2,397 (1,300) (150) (1,450) 947 30 (214) (1,405) (56) (1,645) (698)
FY12E
3,922 600 (1,314) (274) 70 3,004 (1,500) (250) (1,750) 1,254 (1,553) (70) (1,623) (369)
Balance Sheet
FY08
40 65 105 105 70 23 12 (0) 105
FY09
70 36 106 106 76 23 6 (0) 106
FY10
571 182 754 1,350 2,104 1,559 (33) 271 312 (6) 2,104
FY11E
734 2,996 3,730 500 4,230 1,901 (515) 2,371 500 (28) 4,230
FY12E
734 3,507 4,241 500 4,741 2,424 (537) 2,382 500 (28) 4,741
Key Ratios
OPM (%) Net margin (%) Yield (%) Net debt/Equity (x) Debtors (days) Asset turnover (x) ROCE (%) RoE (%) EV/Net sales (x) EV/EBITDA (x) PER (x) Price/Book (x)
FY08
5.1 0.3 1.2 (0.11) 21 1.4 5.4 0.6 3.8 74.8 -
FY09
3.0 0.4 1.2 (0.06) 50 1.4 2.7 0.7 6.4 213.9 -
FY10
15.2 9.2 1.8 1.02 161 1.1 23.9 35.8 6.4 42.2 -
FY11E
18.6 10.9 2.1 (0.64) 62 2.9 20.8 15.5 1.9 10.4 20.7 3
FY12E
22.0 13.6 2.5 (0.56) 60 2.3 27.0 20.1 1.6 7.5 14.0 3
FCF/Share
25.0 20.0 15.0 10.0 5.0 0.0 FY11E FY12E FY07 FY08 FY09 FY10
[email protected]
38
RESEARCH
HINDUSTAN TIMES MEDIA LTD.

A play on Hindi, English and other emerging media HT media (HTML) offers a play on both the Hindi and English print media businesses. It has presences in other emerging media businesses like Radio, job portals etc. 'Hindustan Times' enjoys second position amongst the English dailies with readership base of 3.5mn (IRS Q3FY10). We believe, HT media is uniquely placed to capture growth opportunities across the media platforms - Hindi print, English print, Radio and Internet portals. We expect English ad revenue to post 11% CAGR during FY10-12E and circulation revenue to grow at 2% CAGR during FY10-12E. Hindi business to add value to the over all business We believe Hindi business will be a crucial growth driver for the HT media. HMVL would contribute 31% to the total revenue each in FY11E and FY12E and operating profit contribution would be 28% in FY11 and 33% in FY12E.
[email protected] Ronak Bakshi +91-22-6618 6411 [email protected]
HOLD CMP Rs152 TP Rs163

07 December 2010
STOCK DATA
Market Cap Book Value per share Eq Shares O/S (F.V. Rs10) Free Float Avg Traded Value (6 mnths) 52 week High/Low Bloomberg Code Reuters Code Rs36.3bn. Rs41.3 235mn. 31% Rs 30.2mn Rs186/125 HTML IN HTML.BO
Initiating Coverage
Radio & Mint businesses continue to grow Radio business is operated under the brand name 'Fever 104' has gained good traction and has already achieved breakeven at operating level in Q4FY10. Radio business has grown at 48% CAGR over FY08-FY10. Going forward we expect radio business to grow at 40% CAGR over FY10-12E. Mint continues to remain strong No.2 player following Economic times with total readership of 2.35 lakhs. With increased contribution from radio and Mint business and
reduce losses from Mint (Mumbai edition) we expect EBIDTA to grow at 30% CAGR over FY10-FY12E, OPM at 22% in FY11E and 23% in FY12E
VALUATIONS AND RECOMMENDATION HTML is expected to register revenue and PAT 2Yr CAGR (FY1012E) of 18% and 19% respectively. With cost efficiency measures, improving profitability from emerging businesses of Radio and Mint we estimate OPM to be at 22% and NPM at 9% for the next two years. At CMP, the stock quotes at 19xFY12E EPS. We believe main business growth would kick in from Hindi business (77.7% subsidiary of HT group) - PAT growth of 35% CAGR over FY10FY12E. We initiate the coverage on the stock with HOLD rating and a target price of Rs163 (20xFY12E EPS).
TOP SHAREHOLDERS
Name HPC Mauritius Ltd HDFC Equity Fund Reliance Growth Fund HDFC Prudence Fund Matthews India Fund % holding 9.1 2.9 2.9 1.9 1.3
PERFORMANCE (%)
Absolute Relative 1M (5.0) (2.6) 3M (9.5) (16.4) 12M 7.8 (6.5)
KEY FINANCIALS
FY08 Net Sales YoY Gr. (%) Op. Profit Op. Margin (%) Adj. Net Profit YoY Gr. (%) 12,033 15.7 1,699.0 14.1 1,013.3 4.4 4.3 15.3 12.5 35.4 3.1 22.0 FY09 13,466 11.9 878.7 6.5 9.1 (99.1) 0.0 4.5 0.1 3,970.2 2.9 44.3 FY10 14,129 4.9 2,553.8 18.1 1,359.1 14,906.6 5.8 17.6 14.9 26.5 2.7 14.9 FY11E 16,831 19.1 3,672.2 21.8 1,572.8 15.7 6.7 26.2 15.1 22.9 2.3 10.4
Rs mn FY12E 19,566 16.2 4,443.8 22.7 1,916.2 21.8 8.2 30.5 15.9 18.8 1.9 8.3
HT media BSE (Rebased)
350 280 210 140 70 Nov -09
KEY RATIOS
Feb-10
May -10
Aug-10
Nov -10
39
RESEARCH
Hindustan Times Media Ltd.
A play on Hindi, English and other emerging media

It operates both Hindi and English dailies under the brand Hindustan and Hindustan Times respectively. Hindustan readership has grown at 18% over the last 2-2.5 yrs and has placed it to the third largest position in terms of readership (10mn). English edition The Hindustan enjoys second position amongst the English dailies with readership base of 3.4mn (IRS Q3FY10). Other than the daily newspaper it has its presences in other emerging media businesses like Radio, job portals etc. We believe, HT media is uniquely placed to capture growth opportunities across the media platforms Hindi print, English print, Radio and Internet portals. English ad growth rate to be lower than Hindi ad growth rate The English newspapers with focus on the top 20 cities, accounts for 50 per cent of the print medias ad spend (and in major way dominated by Delhi and Mumbai market). With time, local content is being placed at a premium, more so by the advertising community, to reach out to a large untapped market. As newspapers hold the edge in the rural segment, local content-based regional newspapers (led by Hindi) are increasing readership in regions with low media penetration and in the process developing local advertising markets. Hence we believe going forward growth rate in English ad will be lower than the regional ad growth rates. We expect English ad revenue to post 11% CAGR during FY10-12E and circulation revenue to grow at 2% CAGR during FY10-12E.
Exhibit 57- Ad Revenue & Circulation Revenue (Rs Mn)

English Ad Rev enue 11500 English Circulation Rev enue
9500 7500
5500 3500 FY07

FY08
FY09
FY10
FY11E
FY12E
Exhibit 58- Eng Ad Rev. growing at a lower rate than Hindi Ad rev. (YoY)
DBCL HT Media (English) 50 JPL TOI* (July y r ending) HMVL Print Ad Industry
30
(%)
10
-10
FY07
FY08
FY09
FY10
FY11E
FY12E
-30
RESEARCH
Hindustan Times Media Ltd.
Hindi business to add value to the over all business We believe Hindi business will be a crucial growth driver for the HTML. HMVL would contribute 31% to the total revenue in FY11E and FY12E and operating profit contribution will be 28% in FY11 and 33% in FY12. We have valued HMVL at 17xFY12E (15% discount to HTML targeted valuation (20xFY12E).
Exhibit 59- Hindi business contribution to overall sales

Consol Sales (LHS) 24000 HMVL (contribution %) (RHS) 36%
18000
(Rs mn)
27%
12000
18%
6000
9%
0 FY07
0% FY08 FY09 FY10 FY11E FY12E
Exhibit 60- Hindi business contribution to overall EBIDTA

Consol EBIDTA (LHS) 5,000 4,000
(Rs mn)
HMVL (contribution %) (RHS) 36% 27% 18% 9% 0% -9%
3,000 2,000 1,000 FY07 FY08 FY09 FY10 FY11E FY12E
[email protected]
41
RESEARCH
Exhibit 61- Hindi business contribution to overall PAT

Consol PAT (LHS) 2,400 HMVL (contribution %) (RHS) 90% 0% -90% 1,200 -180% 600 -270% -360% FY07
1,800
(Rs mn)
FY08 FY09 FY10 FY11E FY12E
Radio & Mint businesses continue to grow Mint continues to remain strong No.2 player following Economic times with total readership of 0.247mn. As per the latest Q3 2010 IRS data Mint has grown by 5% QoQ to 0.247mn total readership from 0.235mn total readership in Q2FY10. Radio business has grown at 48% CAGR over FY08-FY10. Going forward we expect radio business to grow at 40% CAGR over FY10-12.With increased contribution from radio and Mint business and reduce losses from Mint (Mumbai edition) we expect EBIDTA to grow at 30% CAGR over FY10FY12E, OPM at 22% in FY11E and 23% in FY12E.
Exhibit 62- Radio Revenue growing at a healthy rate

1000 800 600
(Rs mn)
400 200 0 FY07 FY08 FY09 FY10 FY11E FY12E
[email protected]
42
RESEARCH
Financials
HT Media is expected to register revenue and PAT 2Yr CAGR (FY10-12E) of 14% and 13% respectively. With cost efficiency measures, improving profitability from emerging businesses of Radio and Mint we estimate OPM to be at 22% and NPM at 9% for the next two years.
Exhibit 63- Operational performance

OPM (%) 32.0 24.0 16.0 8.0 0.0 FY07 (8.0)
NPM (%)
FY08
FY09
FY10
FY11E
FY12E
Exhibit 64- Financial performance

ROE (%) 40 30 20 10 0 FY07 -10
ROCE (%)
FY08
FY09
FY10
FY11E
FY12E
Valuation and Recommendation At CMP, the stock quotes at 19xFY12E EPS. We believe main business growth would kick in from Hindi business (77.7% subsidiary of HT group) - PAT growth of 35% CAGR over FY10-12E. We have valued HMVL at Rs200 (17xFY12E EPS). We initiate the coverage on the stock with Hold rating with target price of Rs168 (20xFY12E EPS).
[email protected]
43
RESEARCH
Company Profile
HT Media Limited is one of the Indias foremost media companies, and home to three leading newspapers in the country in the English, Hindi and business segments Hindustan Times (English daily), Hindustan (Hindi daily, through a subsidiary) and Mint (business daily). Hindustan Times was started in 1924 and has a more than 85-year history as one of Indias leading newspapers. The company also has four FM radio stations - Fever 104 in Delhi, Mumbai, Bengaluru and Kolkata. The company has also made a foray into the Internet space through its subsidiary Firefly e-Ventures Limited and has launched a new job portal www.Shine.com. These are in addition to the existing websites livemint.com and hindustantimes.com.
Joint Ventures
The company has 51:49 joint venture (JV) with German media group Hubert Burda to leverage HT Medias expertise in printing and publishing and capture opportunities in the booming high-end magazine and catalogue printing space in India and the Asia-Pacific region. In addition, the company has also entered into 65:35 joint venture with Velti Plc, one of the world s leading providers of mobile advertising solutions, to provide these services in India. HT Media also publishes two Hindi magazines Nandan and Kadambini through its subsidiary Hindustan Media Ventures Limited.

FII 12%
Promoters 69%
DII 14%
Others 5%
[email protected]
44
RESEARCH
Exhibit 66 - HT Medias Top Markets

Delhi Top Dailies (In Mn)
Hindustan Times R108 R208 R109 R209 Q1FY10 Q2FY10 Q3FY10 0% 10% 2.81 3.11 3.25 3.11 3.20 3.12 3.08 20% 30% 40% The Times of India 2.11 1.94 1.95 2.02 1.95 1.88 1.86 50% 60% 70% Nav bharat Times 1.66 1.54 1.57 1.59 1.69 1.72 1.80 80% 90% Punjab Kesari 0.86 0.73 0.77 0.77 0.75 0.75 0.69 100%
Mumbai Top Dailies (In Mn)

The Times of India R108 R208 R109 R209 Q1FY10 Q2FY10 Q3FY10 0% 10% 1.57 1.55 1.52 1.46 1.45 1.48 1.56 20% 30% 40% Mumbai Mirror DNA 0.74 0.87 0.87 0.80 0.81 0.77 0.74 50% 60% Hindustan Times 0.62 0.67 0.71 0.68 0.61 0.61 0.58 70% 0.38 0.53 0.55 0.50 0.54 0.56 0.59 80% 90% Mid-day 0.54 0.48 0.48 0.44 0.42 0.41 0.39 100%
[email protected]
45
RESEARCH

Net sales Growth (%) Gross profit Other operating charges EBITDA Growth (%) Depreciation Other income EBIT Interest paid PBT (before E/o items) Tax Provision E/o loss / (Income) Net profit Growth (%) Diluted EPS (Rs) Diluted EPS Growth (%)
FY08
12,033 15.7 2,657 958 1,699 0.7 570 439 1,568 178 1,390 377 1,013 4.4 4.3 4.4
FY09
13,466 11.9 3,170 2,291 879 (48.3) 688 330 521 323 198 125 189 (116) 9 (99.1) (99.1)
FY10
14,129 4.9 2,241 (313) 2,554 190.6 707 409 2,256 295 1,961 536 69 1,355 1,359 14,906.6 5.8 14,906.6
FY11E
16,831 19.1 2,912 (760) 3,672 43.8 683 471 3,460 163 3,297 800 (45) 2,542 1,573 15.7 6.7 15.7
FY12E
19,566 16.2 3,569 (875) 4,444 21.0 730 515 4,229 120 4,109 1,129 2,980 1,916 21.8 8.2 21.8
Cash Flow Statement

FY08
1,390 570 377 (131) (113) 2,092 (1,196) (325) 75 (1,447) 645 (2) 573 (82) 490 1,135
FY09
9 688 125 1,313 284 2,419 (2,597) (1,126) 280 (3,443) (1,025) 2 1,491 (110) 1,384 359
FY10
1,891 707 536 1,695 166 4,996 (1,575) (1,778) 574 (2,779) 2,217 (490) (70) (34) (595) 1,622
FY11E
3,252 683 800 (1,510) (940) 2,285 (1,200) 755 (446) 1,839 (1,200) (137) (1,338) 501
FY12E
4,109 730 1,129 (201) (958) 4,809 (1,300) 15 (1,285) 3,524 (500) (137) (637) 2,886
Adj. net profit (Including MI) 1,013
Balance Sheet
FY08
469 8,060 8,529 1 2,231 10,760 5,829 1,621 774 2,656 (121) 10,760
FY09
470 8,015 8,485 (69) 3,706 12,122 7,717 871 705 3,035 (206) 12,122
FY10
470 9,241 9,711 218 3,125 13,054 8,407 (1,038) 1,087 4,755 (156) 13,055
FY11E
470 10,676 11,146 1,925 13,071 8,924 472 (174) 4,000 (150) 13,071
FY12E
470 12,455 12,925 1,425 14,350 9,494 673 334 4,000 (150) 14,350
Key Ratios
OPM (%) Net margin (%) Yield (%) Net debt/Equity (x) Debtors (days) Asset turnover (x) ROCE (%) RoE (%) EV/Net sales (x) EV/EBITDA (x) PER (x) Price/Book (x)
FY08
14.1 8.1 0.3 (0.14) 60 1.7 15.3 12.5 3.1 22.0 35.4 4
FY09
6.5 0.1 0.2 0.00 60 1.6 4.5 0.1 2.9 44.3 3,970.2 4
FY10
18.1 9.3 0.2 (0.28) 63 1.4 17.6 14.9 2.7 14.9 26.5 4
FY11E
21.8 9.1 0.3 (0.17) 62 1.4 26.2 15.1 2.3 10.4 22.9 3
FY12E
22.7 9.5 0.3 (0.23) 62 1.4 30.5 15.9 1.9 8.3 18.8 3
FCF/Share
18.0 12.0 6.0 0.0 -6.0 -12.0 FY11E FY12E FY07 FY08 FY09 FY10
[email protected]
46
RESEARCH
Annexure 1
Mumbai Kolkata, Delhi, Chennai, Bengaluru, Hyderabad
Tier I: Top Metros (Metros 6 cities
Pune, Chandigarh, Jaipur Ahmedabad, Lucknow, Ludhiana Cochin, Vijaywada, Vizag, Nagpur, Patna, Surat, Coimbatore, Jamshedpur Amritsar, Trivandrum, Nasik, Bhopal Indore, Vadodara, Kanpur, Madurai
Tier II: Key Urban Towns (KUT) 22 cities
Aurangabad, Allahabad, Gwalior, Jodhpur, Raipur, Bhubaneshwar, Goa, Pondicherry, Aligarh, Moradabad, Rohtak, Rourkela, Udaipur, Anand, Faizabad, Hassan, Shimla, Roorkee, Shilong
Tier III: Rest of Urban India (ROUI) 39 cities (population> 500,000) and 5094 towns
Source: PINC Research
Annexure 2 - Wide scope in rural market

Urban Population (Mn) Can Read (%) Currently Reading (% of literates) Source: Company, PINC Research 276 83 43 Rural 595 62 21 Total 871 69 29
[email protected]
47
RESEARCH
T E A M
EQUITY DESK
Sadanand Raje Head - Institutional Sales Technical Analyst [email protected] 91-22-6618 6366
RESEARCH
Vineet Hetamasaria, CFA Nikhil Deshpande Vinod Nair Ankit Babel Hitul Gutka Subramaniam Yadav Madhura Joshi Satish Mishra Urvashi Biyani Rohit Kumar Anand Karan Taurani Namrata Sharma Ronak Bakshi Bikash Bhalotia Harleen Babber Dipti Vijaywargi Naveen Trivedi
Auto, Cement Auto, Auto Ancillary, Cement Construction, Power, Capital Goods Capital Goods Power Construction Power Fertiliser, Engineering Fertiliser, Engineering IT Services IT Services Media Media Metals, Mining Metals, Mining Metals, Mining Pharma, FMCG
[email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] dipti.vijaywargi @pinc.co.in [email protected]
91-22-6618 6388 91-22-6618 6339 91-22-6618 6379 91-22-6618 6551 91-22-6618 6410 91-22-6618 6371 91-22-6618 6395 91-22-6618 6488 91-22-6618 6334 91-22-6618 6372 91-22-6618 6382 91-22-6618 6412 91-22-6618 6411 91-22-6618 6387 91-22-6618 6389 91-22-6618 6393 91-22-6618 6384
SALES
Rajeev Gupta Shailesh Kadam Ganesh Gokhale
Equities Derivatives Derivatives
[email protected] [email protected] [email protected]
91-22-6618 6486 91-22-6618 6349 91-22-6618 6347
DEALING
Mehul Desai Naresh Panjnani Amar Margaje Ashok Savla Sajjid Lala Raju Bhavsar Kinjal Mehta Chandani Bhatia Hasmukh D. Prajapati Kamlesh Purohit
Head - Sales Trading Co-Head - Sales Trading
[email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected]
91-22-6618 6303 91-22-6618 6333 91-22-6618 6327 91-22-6618 6321 91-22-6618 6337 91-22-6618 6322 91-22-6618 6333 91-22-6618 6324 91-22-6618 6325 91-22-6618 6357
SINGAPORE DESK
Amul Shah [email protected] 0065-63270626/27/28
DIRECTORS
Gaurang Gandhi Hemang Gandhi Ketan Gandhi [email protected] [email protected] [email protected] 91-22-6618 6400 91-22-6618 6400 91-22-6618 6400
COMPLIANCE
Rakesh Bhatia Head Compliance [email protected] 91-22-6618 6400
Infinity.com
bright thinking
Financial Securities Ltd
SMALL WORLD, INFINITE OPPORTUNITIES
Member : Bombay Stock Exchange & National Stock Exchange of India Ltd. : Sebi Reg No: INB 010989331. Clearing No : 211 1216, Maker Chambers V, Nariman Point, Mumbai - 400 021; Tel.: 91-22-66186633/6400 Fax : 91-22-22049195
Disclaimer: This document has been prepared by the Research Desk of M/s Infinity.com Financial Securities Ltd. (PINC) and is meant for use of the recipient only and is not for public circulation. Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors The information contained herein is obtained and collated from sources believed reliable and PINC has not independently verified all the information given in this document. Accordingly, no representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. The opinion expressed or estimates made are as per the best judgement as applicable at that point of time and PINC reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval PINC, its affiliates, their directors, employees and their dependant family members may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document This report has been prepared on the basis of information, which is already available in publicly accessible media or developed through analysis of PINC. The views expressed are those of analyst and the PINC may or may not subscribe to all the views expressed therein This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. Neither this document nor any copy of it may be taken or transmitted into the United State (to U.S.Persons), Canada, or Japan or distributed, directly or indirectly, in the United States or Canada or distributed or redistributed in Japan or to any resident thereof. The distribution of this document in other jurisdictions may be restricted by law, and persons into whose possession this document comes should inform themselves about, and observe, any such restrictions Neither PINC, not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. Copyright in this document vests exclusively with PINC and this document is not to be reported or circulated or copied or made available to others.
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SECTOR REPORT

Print Media Overview ...............................................................................

Regional Print Media ................................................................................

Sector Key Concerns ..............................................................................

Investment Rationale Summary ..............................................................

Dainik Bhaskar Corporation Ltd . .............................................................

Jagran Prakashan Ltd. ............................................................................

Hindustan Media Ventures Ltd. ................................................................

Hindustan Times Media Ltd. ....................................................................

Sector View - Positive

PRINT MEDIA: ON GROWTH TRACTION

Ad Gr (%)* DBCL JPL # HMVL HTML 19 25 26 16

* CAGR (FY10-FY12E) # Incl Mid-day print business

Print Media Overview

Print media to grow at a 9.1% CAGR (FY10-14P)...

Exhibit 1 - Print media industry size

Source: KPMG, PINC Research

Exhibit 2 - Ad Growth Rate of Players vs Industry (YoY %)

Growth lies in regional print media

Exhibit 3 - Indian Print Landscape: Strength of regional print media

Andhra Pradesh (excluding Hyderabad) Population - 72 Million

Source: Population data sourced from www.india.gov.in

Exhibit 4 - Cheaper advertisement rates in non English papers.

Source: IRS Q210, Mediaware March 2010, PINC Research

Exhibit 5 - Metro, KUT & ROUI share in newspaper ad in 09

KUT & ROUI 82% 77% 52% 53% 46%

28% 35% 25% 21% 20% 28% 18% 27%

48% 47% 54%

48% 45% 40%

72% 65% 75% 79% 80% 72% 82% 73%

52% 55% 80% 100%

1,600 800 FY07 FY08 FY09 FY10

Source: Company, PINC Research

Exhibit 7 - Ad Growth Rate (YoY)

Source: Company, PINC Research [email protected]

Exhibit 8 - Operational Model

Print Business Dynamics

Others - Employee cost 12%-15% of sales &

Circulation copies x Cover price

Mkt/Promotional cost 30-35% of Sales 5%-6% of sales

Source: PINC Research

* See Sector key concerns (for details on newprint)

Exhibit 9 - Print Industry Ad Revenue (Rsbn)

150 INR (bn)

-8.0% 2008 2009 2010p 2011p 2012p 2013p 2014p

Exhibit 10 - Print Circulation Revenue (Rsbn)

0.0% 2008 2009 2010p 2011p 2012p 2013p 2014p

Sector Key Concerns

Exhibit 11 - Newsprint Prices in USD/MT

Source: Bloomberg, PINC Research

Investment Rationale Summary

Dainik Bhaskar Corporation Ltd

Source: Company, PINC Research

Exhibit 13 - Dainik Bhaskar Readership across states

Presence in almost all the major Hindi Markets - 14 states...

5.76 4 3.13 0 R1-08

5.82 3.13 R2-08

Source: IRS, PINC Research