DB Corp. DB Corp: Making a mark

Newspapers faced difficult times in 2017, as demonetisation, followed by the implementation of the GST, led to a steep decline in ad revenue growth.

But large newsprint players, especially vernacular ones, managed to come out reasonably unscathed as they were able to make up for a part of the revenue hit by improving circulation and hiking cover prices.

According to the recent EY FICCI report on Media and Entertainment, the vernacular print industry is expected to grow at an annual rate of 8-9 per cent till 2020.

In this regard, DB Corp, the publisher of one of India’s most widely circulated Hindi Newspaper, Dainik Bhaskar, appears well-placed to meet or exceed the industry levels in advertising, given that many positives are set to play out over the next year or so.

Polls in key Hindi-speaking states later this fiscal, the general elections next year and a revival in key sectors in the economy (real estate and consumer goods) augur well for the company’s advertising revenues.

Strong leadership position and expansion into new territories such as Bihar and other key markets will aid the company. The company’s financials are strong, with negligible debt.

Investors with a two-year horizon can consider buying the stock for steady, rather than spectacular, returns.

Though the stock has taken a beating, especially in the last two to three years, the company’s prospects looks good.

At ₹316, the stock trades at 15 times its trailing earnings, marginally better than peer Jagran Prakashan, which trades at 16 times.

Dominant player

DB Corp enjoys leadership over its peers in terms of circulation in States such as Madhya Pradesh, Chhattisgarh, Rajasthan, Haryana and Punjab. The company has over 60 editions published in four different languages and has a presence in 14 States. The total readership for its newspaper is claimed to be 12.6 million, the highest in the industry.

The circulation expansion strategies have worked in its favour and, according to the management, almost six lakh copies (in December 2017) have been added since its expansion drive from July. Of the additions made in circulation, three lakh has been contributed by Bihar, a market where it has expanded recently. The management also states that the company has been able to sustain the momentum in circulation.

The company derives over 50 per cent of its advertisement revenue from local companies. The other half comes from national advertisers. Being a strong regional player, the revival in advertisement from sectors such as real estate, education, electronics and lifestyle will help the company improve revenues.

Revenue to grow

Advertisements account for 70 per cent of DB Corp’s revenues; circulation contributes 20 per cent and the rest is from other income. In the third quarter, advertisement revenue had declined about 6 per cent Y-o-Y owing to the spilt in the festive season between the September and December periods. Also, slower recovery in ad spends from multiple sectors weighed on the company’s earnings.

However, government advertisement spends are likely to increase with the elections coming up in several states where DB Corp has strong presence.

The recent thrust on rural spends by the government, revival in key macro indicators such as the IIP and recovery in key industries should bolster advertisements.

The radio segment (My FM 94.3) operates from 30 stations in seven states. It is one of the largest players in certain States such as Rajasthan, Punjab and Haryana. With the company improving its content and strengthening its presence in other states, the radio business should improve consistently.

On the digital platform front, the company has 13 portals (such as food, fashion, finance) and two mobile applications. Though the digital advertisement contribution is small for the company, with the increasing digital penetration and better internet connectivity, advertisers are gradually increasing spend in digital platforms.

For the nine months ended December 2017 revenues grew 1.2 per cent Y-o-Y to ₹1,761 crore, while profit declined 14 per cent to ₹267 core largely due to increase in newsprint cost of 7.5 per cent Y-o-Y.