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FY23 could bring in sharp recovery…

Jagran Prakashan reported a weak set of Q4FY21 numbers. Operating revenue (consolidated) declined 8.8% YoY to | 406.4 crore as print ad revenue was down 10.7% YoY to | 234 crore. Subscription and radio revenue also registered de-growth of 12.1% YoY and 7.4% YoY, respectively on a depressed base. EBITDA, however, was up 66.6% YoY to | 89.9 crore. EBITDA margins were at 22.2%, up ~1000 bps YoY. Cost control measures and softened newsprint prices helped EBITDA despite weak revenues. Consequently, PAT at | 37.6 crore grew more than 3x YoY due to strong performance at EBITDA level and also higher other income.

Recovery halted due to outbreak of second wave…

Print ad revenue was down 10.7% YoY, despite a favourable base (24.3% YoY decline), on account of outbreak of second Covid wave. We note that in the base quarter, the impact was severe due to fear psychosis of newspaper carrying virus, which was later dismissed by the Health Ministry (Link). Circulation also improved to ~80% of pre-Covid level now from the trough of 40% in the past.

Going forward, we believe that gradual economic recovery due to possible accelerated vaccination drive and resumption of spending by some key sectors like auto, real estate and tailwind from UP election would help print advertisement. We are baking in 23.5% CAGR print advertisement growth over FY21-23E to | 1080 crore on a depressed base while circulation growth is expected to grow at 16.5% CAGR over FY21-23E, largely due to a recovery in circulation with cover price increase only in FY23E once the volumes stabilises. We expect digital, radio revenues to grow 14.9%, 38.5% CAGR, respectively, in FY21-23E.

Newsprint costs see rise

Jagran indicated that there has been a temporary increase in newsprint prices in Q4FY21 but given the lower pagination and contracted inventory, the impact will be much lower than the price rise. However, as the business scales up some cost like employee and marketing expenses may see some rise. We are baking in 42.2% EBITDA growth over FY21-23E, with margins reaching 23% in FY23E.

Valuation & Outlook

We expect the ad outlook to remain challenging in H1FY22E due to subsequent impact of second wave and possibility of third wave that would push economic recovery in FY23E only. One key attractive feature of Jagran has been strong distribution to shareholders in the form of dividend and buyback (total distribution of | 1204 crore in the last four years), especially | 101 crore in the challenging times in last one year. We maintain BUY rating with a revised target price of | 70, at 8x FY23 P/E (earlier TP: | 55/share).

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