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Thursday, October 22, 2009

Jagran Prakashan Ltd:Recomendation/news/views/analysis/buy/sell/hold

Scripscan:Jagran Prakashan Ltd

Story:Jagran runs 37 editions of its newspaper across 11 States under the ‘Dainik Jagran’ brand. It is the most read (with maximum circulation) regional language newspaper in the country, catering largely to the Hindi speaking States. There is very strong presence in towns and rural areas.Rural demand is expected to be fairly robust as evidenced by sales figures of FMCG companies and the increasing presence of mobile operators in these areas. As with broadcasting, delivering increasingly regional (and localised) flavour has been a prov.Hindustan Times, for example, has looked to expand in the Hindi language genre under the Hindustan brand and is now the third largest read in this category according to recent IRS surveys (IRS 2008 R2).Against this background, Jagran derives 60 per cent of its advertising revenues from regional advertisers and the balance from national ones. Regional advertising has grown by 14 per cent over the past one year for the company. With leadership in most of these 11 States, Jagran appears well placed to monetise its leadership status.Near-term triggers for advertising revenues include the education sector, with admissions around the corner as well as the election-related ads (expected to show up in the 2009-10 numbers).Over the long-term however, telecom, with more operators looking to expand and new operators coming in, automobiles, with the sector looking at a revival and others such as FMCG and financial services may be key advertisers.A recent FICCI-KPMG report estimates advertising in print to grow at a compounded annual rate of 10 per cent to Rs 17,430 crore over the next four-five years led by education, services and banking sectors.Investors may retain their shares of Jagran Prakashan, the top newspaper in the ‘Hindi-heartland’, considering its ability to monetise its leadership status in garnering greater advertisement revenues along with reasonable growth on subscription.At Rs 110, the stock trades at 25 times its likely 2010 per share earnings. This is at a significant premium to the broader market and papers such as Deccan Chronicle, but at a discount to HT Media.Given the expensive nature of the stock and average growth rates in advertising expected over the next one year, investors may have to hold on with a two-three-year perspective for capital appreciation. But decline in newsprint prices, expectation of higher spends from the relatively insulated education and telecom sectors, and increase in cover price may expand revenues and realisations for the company.Even in the turbulent December 2008 quarter, advertisements (which contribute 67 per cent to overall revenues) as well as subscription revenues have each grown by 4 per cent over the previous year.

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