The results for the recently concluded quarter were above our expectations - net sales were up 12.3% y-o-y (v/s our estimate of 7%) at Rs2,318mn driven by local advertising growth.
Going forward, we estimate ad revenue to grow at 12% in FY10 v/s industry growth rate of 8%. We also expect Jagran to benefit from lower newsprint prices.
With expected breakeven of ”I-next” and other businesses in next 15-18 months, the profitability should improve further. The stock trades at EV/EBITDA of 12x FY10E and 10x on FY11E, 20% discount to its 3-year average EV/EBITDA.
We expect it to trade at premium to HT Media (10x EV/EBITDA) given that Jagran is a pure Hindi play as against Hindustan Times which derives only 30% revenue from Hindi segment. Recommend BUY.
Disclaimer: HT Media Ltd owns and publishes Hindustan Times, Hindustan and Mint