Jagran prakashan

I thought the Jagran results have been very good this quarter, especially considering valuation gap versus peers, and have been somehow surprised by the markets relatively muted reaction today.

Large positives for me were:-

1. EBITDA has grown a solid 43% YOY despite slower YOY growth in revenue (5%). Margins have also expanded from 16% last quarter and 17% Q3 last year to 20% now, and this increase is going to get better as the twin tailwinds of revenue growth come into Q4 and also newsprint price corrections start reflecting even more (all peers have confirmed sharp falls in newsprint costs over the last couple of Qs). Just cost of materials for this business has gone down to 24% from 30% last year already this quarter

2. This is an industry which will benefit from large operating leverage as supply of ad volumes is pretty unlimited in print and additional pages can be added when volumes come in, whilst fixed costs remain the same. In my thesis I expect this operating leverage to play out with increased ad spends expected in Q4 (H2 is generally heavy for the industry + election ad spending will now come in a big way for media)

3. From a value perspective things look very attractive still. At 1.1x MCap to sales, last time when tailwinds were there this was at 3x sales. Even 6.3x EV EBITDA current multiple looks very cheap versus the usual 11-12x multiples in good times. Value is further confirmed by the excellent dividend yield of 4%+

4. Peers such as DB Corp/HT Media have already seen significant re rating. Even radio industry peers like ENIL and Music Broadcast saw significant re rating post tailwinds starting last quarter. In my thesis, I expect Jagran to also be a similar beneficiary, with these EBITDA margins benefits just starting to come in + Q4 and Q1 ahead having twin benefits of revenue growth + margin benefit.

5. Charts look good in my opinion. The bottom is clearly in and we seem to be in an uptrend after a Stage 4 fall and Stage 1 consolidation until recently,

Disclosure : I am invested in self and family accounts and am biased, have buy transactions in the stock and other peers here earlier and last week. I am not a SEBI registered advisor and this is not investment advice,