BackDB Corp: what after election ads dry up?
Until an economic recovery gathers steam, any near-term upside may be limited
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DB Corp Ltd, the publisher of Hindi daily Dainik Bhaskar, has seen its shares gain 47% in the past two years, outperforming the broader markets on election-led spending on advertisements, strong growth from the consumer products segment and support from local ads in smaller cities. Will the gains be sustainable in the next fiscal year?
While the growth in the March and June quarters will be good thanks to the elections, the new fiscal year as a whole will be challenging given the high base. Robust earnings growth in 2013-14 was because of a sharp reduction in losses of emerging editions (Maharashtra and Jharkhand) and robust advertising revenue, says Amit Patil, Angel Broking Ltd’s media analyst. But DB Corp launched the Bihar-Patna edition in January, which is expected to post losses in the first few quarters. As a result, earnings growth will slow to 13% year-on-year in 2014-15 from around 39% in the year to March, according to Angel Broking.
In the first half of 2013-14, around 2-2.5% of advertising growth came from advertisement spending by political parties and individual candidates. Patil of Angel Broking expects advertisement revenue growth to ease to 11.4% from 18%, while subscription revenue growth will remain around 14.5%. Structural growth in the real estate and lifestyle segments in smaller cities, and TV ad cap implementation will support advertisement spending, but there are concerns over sustainability, given the weak economy.
DB Corp posted better-than-expected results in the December quarter because of state election-led spending as the company is present in the Hindi heartland—Madhya Pradesh, Rajasthan and Chhattisgarh. Total income grew 18.6% to ₹ 525.4 crore with advertisement revenue growing 18.2% and circulation revenue was up 13.5% in the December quarter against the previous year. Net profit grew 33.8% to ₹ 94.5 crore.
The DB Corp stock has fallen 5% after touching a record high in the first week of March while the broader markets have gained 12%. After the run-up in the past year, the stock is trading at an expensive 4.1 times one-year estimated price to book. Until an economic recovery gathers steam, any near-term upside may be limited.
HT Media Ltd, the publisher of Mint, competes with DB Corp in some markets.
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