Buy DB Corp, target price Rs 103: ICICI Securities

ICICI Securities has given a buy rating to DB Corp with a target price of Rs 103. The share price moved down by -0.52 per cent from its previous close of Rs 76.35. The stock’s last traded price is Rs 75.95.

DB Corp’s Q4FY20 advertisement revenue dipped 20.1 per cent year on year but the company still outperformed its peers. The company’s EBITDA dip was cushioned from lower newsprint prices and pagination. It expects cost savings of Rs 1-1.2 billion in FY21 to aid in protecting large EBITDA slip.

Investment Rationale

DBCL remains hopeful on the return of readers and advertisers, but the brokerage sees imminent risk to advertisement revenue from digital. Lower circulation losses could aid earnings, but the brokerage does not see the industry moving towards it.

The dividend distribution policy remains unchanged at 65 per cent payout. Promoters have cut debt to Rs 1.6 billion from Rs 3 billion, but pledge shares remain high on lower stock price. Promoters are committed to reduce debt to nil, and revoked complete pledged shares. The brokerage has cut its EPS estimates by 23.3 per cent / 3.4 per cent for FY21/FY22, respectively, and target price to Rs 103 (from Rs 107).

Source: ICICI Sec

Financials

For the quarter ended March 31, 2020, the company has reported a Consolidated sales of Rs 486.65 crore, down -18.72 per cent from last quarter sales of Rs 598.75 crore and down -17.31 per cent from last year same quarter sales of Rs 588.52 crore. The company reported net profit after tax of Rs 24.05 crore in the latest quarter.

Promoter/FII Holdings

Promoters held 71.65 per cent stake in the company as of March 31, 2020, while FIIs held 17.39 per cent, DIIs 3.87 per cent and public and other 7.08 per cent.