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Cost rationalisation drives profitability recovery…

About the stock: Jagran Prakashan (Jagran) is a media conglomerate with interests spanning across printing and publication of newspapers & magazines, FM radio, digital, outdoor advertising and promotional marketing, event management and activation businesses.

* It publishes 10 publications from 13 states in five different languages. Group’s radio has operations at 39 FM stations besides web stations

Q2FY22 Results: Jagran reported a strong performance on a benign base.

* Revenues at | 270.3 crore were up 33% YoY on a depressed base. Print ad revenue was up 50% YoY (~23% below pre-Covid levels) while radio ad revenue also registered de-growth of 40% on benign base

* EBITDA was at | 101.4 crore while margins at 25.2%, up ~10.4 percentage points YoY due to cost rationalisation

* PAT was at | 61.8 crore, up 380% YoY

What should investors do? Jagran’s share price has declined by ~65% over the past five years, owing to print/radio sector weakness.

* We maintain our BUY rating with cost rationalisation driving profitability recovery faster than anticipated along with healthy payout potential.

Target Price and Valuation: We value Jagran at | 80 i.e. 8x FY23E P/E.

Key triggers for future price performance:

* Decline in newsprint prices, which is key for margins trajectory

* Recovery in print and radio ad

* Return of government ad, which forms key for the news segment

Alternate Stock Idea: Besides Jagran, we like Inox Leisure in the media space.

* A play on reopening and improving market share of multiplexes

* BUY with a target price of | 495

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