Hold DB Corp; target of Rs 190: ICICI Direct

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ICICI Direct's research report on DB Corp

DB Corp’s revenue for the quarter came in lower than our expectations on account of muted print ad revenues from some of its key sectors like automobile, education, lifestyle, etc. We note that the company did not disclose digital revenues separately and clubbed it with print revenues. (Print + digital) revenues came in at Rs 404.8 crore, down 4.4% YoY (steeper than expected decline of 3% YoY). Circulation revenues came in at Rs 131.4 crore, down 2.3% YoY, largely led by clamping down on some copies in key markets of Gujarat and Bihar. Radio revenues grew a strong 19% YoY. Reported EBITDA came in at Rs 175.5 crore (up 4.5% YoY). We note that EBITDA for the quarter saw a benefit of Rs 8.5 pertaining to adoption of AS116. Adjusted EBITDA would have been higher at Rs 167 crore, aided by lower other expenses.

Outlook

Revenue growth was sluggish due to economic slowdown as well as one off headwinds faced by some key categories. Growth is expected to pick up in H2FY20 on account of festivities. This, coupled with moderation of newsprint prices, is expected to drive margin expansion. We maintain HOLD rating, valuing the company at 10x FY21E P/E for a target price of Rs 190. Decision on import duty on newsprint will be a key monitorable which could partially dilute lower price benefits.

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