Jagran prakashan

dhwanil,

From management commentary it seems that the current margin levels are likely to be maintained going forward. They seem focussed on profitability and that comes out from two statements in q2 fy 16 concalls.

first is when they specifically mentioned that the OOH busines (out of home) is profitable but its profitability doesnt match with other lines of business and hence they are in the process of gradually easing out of it.

Secondly in response to some question about ads from online retailers they were quite categorical that they could have got more volumes of ads but did not want to compromise on profitability.

In response to your second query, I think till now focus might have been to turn these publications profitable and then chase growth. The q2 concall also mentions that the other newspapers have started becoming profitable. So for next few quarters, if the profitability of these publications improve, then bottomline growth may be much more than topline growth. About topline growth, the base Jagran business can grow anywhere between 10-15% by a mix of growth in ad and circulation revenues. How they manage to grow the radio business needs to be seen. They also mentioned in q1 concall that their focus is on getting radio stations in regions where they are strong in the newspaper business so that there is opportunity for cross selling and providing bundled packages.

the smaller publications’ profitability and margin picture is the key monitorable.

all in all Jagran to me looks like a steady business not likely to show too scorching a growth but a steady 10-15% topline growth and 20-25% bottomline growth in a company with good honest capacble management and extremely good financial characteristics like good clean balance sheet, good cash flows, high dividend payouts and good return ratios. I also expect some slight re rating to happen to take it in line with valuations of DB corp. This can take a couple of quarters time.

Radio business is an optionality that can play out if things go right. Management is on record saying that they dont completely rule out demerger or any other value unlocking opportunity.

The current perception about newspaper business is that its a no growth business likely to get decimated with the onslaught of online readership. But if company can prove this perception to be wrong by posting decent results for next few quarters, its likely to provide decent returns.