1QFY2012 Result Update | Media July 29, 2011

Jagran Prakashan
Performance Highlights
(` cr) Revenue EBITDA OPM (%) PAT
Source: Company, Angel Research

BUY
CMP Target Price
1QFY11 265.0 85.3 32.2 55.6 % yoy 12.4 (11.7) (692)bp (10.6) 4QFY11 275.5 64.3 23.3 42.1 %qoq 8.1 17.1 194bp 18.1

`114 `148
12 Months

1QFY12 297.9 75.3 25.3 49.7

Investment Period
Stock Info Sector Market Cap (`cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code

MEDIA 3,742 0.5 148/105 1,17,022 2 18,197 5,482 JAGP.BO JAGP@IN

For 1QFY2012, Jagran Prakashan (JPL) reported a weak performance on the revenue and earnings front. The companys top-line growth was driven by subdued ad and circulation revenue. Earnings for the quarter declined due to a 692bp yoy contraction in operating margin due to high raw-material prices. We maintain our Buy recommendation on the stock. Key highlights of the quarter: Ad revenue grew by ~8% yoy and qoq and circulation growth stood at ~5% yoy and ~4% qoq. Non-publishing business revenue grew by 80.3% yoy and ~9% qoq, which comprises event, outdoor and digital businesses. The company successfully launched Punjabi Jagran (now JPL caters to five different languages). JPL launched the 11th edition of The Inquilab, the largest read Urdu newspaper in UP and New Delhi through its subsidiary Mid-Day Infomedia Ltd. City Plus launched four more editions, now totaling 30 editions. Circulations of iNext grew by 24% yoy. Outlook and valuation: We expect JPL to post a 9% CAGR in its top line over FY201113E, driven by the ~10% CAGR in advertising revenue and a ~3% CAGR in circulation revenue. The other businesses and MML are estimated to record a CAGR of ~11% and 13%, respectively, during the mentioned period on better traction. In terms of earnings, we expect JPL to report a CAGR of 10% over FY201113E, driven largely by top-line growth and sustained margins. We believe underperformance of the stock provides a good entry point. Hence, we maintain our Buy view with a revised target price of `148 (`161), based on a P/E multiple of 18x FY2013E (in-line with its historical valuations). Downside risks to our estimates include 1) any further rise in newsprint prices and 2) competition becoming fierce.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 52.7 25.1 10.5 11.7

Abs. (%) Sensex Jagran

3m (5.7) (8.7)

1yr 1.1 (6.3)

3yr 31..9 72.8

Key financials (Consolidated)

Y/E March (` cr) Net sales % chg Net profit (Adj.) % chg EBITDA margin (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

FY2010 942 14.4 176 92.0 30.0 5.6 20.4 5.6 30.0 30.0 4.0 13.2

FY2011 1,221 29.6 210 19.4 29.2 6.6 17.1 5.4 32.5 35.0 3.1 10.5

FY2012E 1,339 9.6 229 9.1 29.4 7.2 15.7 5.0 33.2 36.7 2.8 9.5

FY2013E 1,453 8.5 255 11.1 29.5 8.1 14.1 4.7 34.4 38.3 2.6 8.7

Sreekanth P.V.S
022 3935 7800 Ext: 6841

sreekanth.s@angelbroking.com

Please refer to important disclosures at the end of this report

Jagran Prakashan | 1QFY2012 Result Update

Exhibit 1: Quarterly performance (Consolidated)

Y/E March (` cr) Net Sales Consumption of RM (% of Sales) Staff Costs (% of Sales) Other Expenses (% of Sales) Total Expenditure Operating Profit OPM Interest Depreciation Other Income PBT (excl. Ext Items) Ext Income/(Expense) PBT (incl. Ext Items) (% of Sales) Provision for Taxation (% of PBT) Recurring PAT PATM Reported PAT Equity shares (cr) EPS (`)
Source: Company, Angel Research

1QFY12 297.9 98.9 33.2 39.3 13.2 84.4 28.3 222.6 75.3 25.3 2.8 15.0 14.5 72.0 72.0 24.2 22.3 31.0 49.7 16.7 49.7 31.6 1.6

1QFY11 265.0 75.6 28.5 34.7 13.1 69.3 26.1 179.6 85.3 32.2 1.2 12.5 10.6 82.2 82.2 31.0 26.6 32.4 55.6 21.0 55.6 30.1 1.8

% yoy 12.4 30.8 13.0 21.9 23.9 (11.7) 125.0 20.1 36.7 (12.4) (12.4) (16.1) (10.6) (10.6) (10.6)

4QFY11 275.5 91.1 33.1 36.5 13.3 83.5 30.3 211.2 64.3 23.3 2.5 16.0 12.6 58.4 58.4 21.2 16.3 27.9 42.1 15.3 42.1 31.6 1.3

% qoq 8.1 8.6 7.4 1.0 5.4 17.1 11.4 (6.5) 14.8 23.3 23.3 36.7 18.1 18.1

FY2011 1,096.1 333.2 30.4 143.0 13.0 297.0 27.1 773.1 322.9 29.5 7.2 56.4 42.4 301.7 301.7 27.5 95.9 31.8 205.8 18.8 205.8 31.6 6.5

FY2010 941.9 273.6 29.0 121.2 12.9 264.8 28.1 659.6 282.3 30.0 6.6 50.8 34.3 259.2 259.2 27.5 83.3 32.1 175.9 18.7 175.9 30.1 5.8

% chg 16.4 21.8 17.9 12.1 17.2 14.4 9.6 11.2 23.9 16.4 16.4 15.1 17.0 17.0

Weak performance due to sluggish ad revenue growth

JPL reported top-line growth of 12.4% yoy/~8% qoq to `297cr. The company reported weak advertisement revenue growth of ~8% yoy and qoq, while circulation came in higher by 5% yoy/~4% qoq. Advertising revenue came in low on account of a slowdown in ad spend by the education sector and lower national advertising. Earnings fell by ~11% yoy. The companys other businesses continue to show strong traction, with revenue growing by 80% yoy/8% qoq to `34cr. Management has guided for ad revenue growth of 1415% yoy for FY2012E due to ad spends by the education sector, UP elections and the festival season.

July 29, 2011

Jagran Prakashan | 1QFY2012 Result Update

Exhibit 2: Low English/Hindi ad rev. growth...

350 300 250 200 150 100 50 30.0 25.0 20.0

Exhibit 3: Circulation revenue grew by yoy/qoq

250 200

(` cr)

(%)

15.0 10.0 5.0 -

(` cr)

150 100 50 Ad-revenue

1Q11 2Q11

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

Circulation revenue
3Q11 4Q11

Non-publishing business
1Q12

Top-line (LHS)

yoy (RHS)

Source: Company, Angel Research

Source: Company, Angel Research

Gross margin contracts and drags OPM

At the operating level, JPL delivered a 692bp yoy contraction in OPM, though it expanded by 194bp qoq. The company faces gross margin pressure and witnessed a 465bp yoy gross margin contraction impacted by increased newsprint cost, which stood at `31/kg. JPL consumed ~28000tonnes of newsprint during the quarter and consumption increased by ~10%. While on a yoy basis, other expenses stood significantly very high (up 220bp) and the staff cost remained flat.

The company reported a 10.6% yoy decline in its earnings, aided by a steep decline in its OPM during the quarter. Exhibit 4: Earnings decline
60 50 40 200.0 150.0

Exhibit 5: OPM and gross margin contract yoy

80 70 60 50 40 30 20 10 70 72 70 71 71 71 69 67 67

(` cr)

(%)

(%)

30 20 10 -

100.0 50.0 (50.0)

30

34

28

27

32

33

30

25

25

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

PAT (LHS)

yoy growth (RHS)

OPM

Gross margins

Source: Company, Angel research

Source: Company, Angel research

July 29, 2011

1Q12

Jagran Prakashan | 1QFY2012 Result Update

Investment rationale
Strong ad-revenue growth on account of higher color inventory, peg 10% CAGR: As per our expectation, JPL recorded ad revenue growth of 20% yoy in FY2011. For FY201213E, we expect ad revenue to grow by 812% yoy. We maintain a conservative stance on managements robust guidance of 1415% yoy growth due to lower national advertisements (management guidance) and low pick-up in advertisement from the education sector (expect pressure in advertisements till 1HFY2012). Margin to remain stable on significant cost efficiencies: For FY2012E, we expect JPLs operating margin to sustain at ~29% despite a 1011% rise in newsprint costs, aided by higher top-line growth on the back of robust growth in operational revenue from MML and increased advertising revenue, various cost curtailment measures and improving profitability in the nascent businesses of i-Next/City Plus and OOH/event management. Underperformance a good entry point, JPL attractive at 14x FY2013E EPS: JPL acquired the print business from Mid-Day Multimedia, whose presence in markets like Mumbai, Delhi, Bangalore and Pune (recently launched) is likely to fill the gap in JPLs portfolio vs. its peers HT Media (HT and Hindustan) and DB Corp. (Dainik Bhaskar and DNA), which offer both English and Hindi publications to their advertisers. Hence, we believe JPLs combined offerings are going to record a strong 9% CAGR in revenue over FY201113E. With JPLs wider portfolio (including Mid-Day Publications), we believe JPL is well poised to benefit from steady growth in print media. The underperformance of the stock and attractive valuations (at the CMP, the stock trades at 14x FY2013E EPS) provide a good entry point for investors.

Outlook and valuation

We expect JPL to post a 9% CAGR in its top line over FY201113E, driven by the ~10% CAGR in advertising revenue and a ~3% CAGR in circulation revenue. The other businesses and MML are estimated to record a CAGR of ~11% and 13%, respectively, during the mentioned period on better traction. In terms of earnings, we expect JPL to report a CAGR of 10% over FY201113E, driven largely by top-line growth and sustained margins. We believe underperformance of the stock provides a good entry point. Hence, we maintain our Buy view with a revised target price of `148 (`161), based on a P/E multiple of 18x FY2013E (in-line with its historical valuations). Downside risks to our estimates include 1) any further rise in newsprint prices and 2) competition becoming fierce.

July 29, 2011

Jagran Prakashan | 1QFY2012 Result Update

Exhibit 6: Key assumptions

(` cr) Advt Revenue Dainik Jagran I-Nxt City plus Circ. Revenue Dainik Jagran I-Nxt Others Revenue from Mid-Day Revenue from others Non-Publishing Others Total YoY growth (%) Advt Revenue Dainik Jagran I-Nxt City plus Circ. Revenue Dainik Jagran I-Nxt Others Revenue from Mid-Day Revenue from others Non-Publishing Others % of Total Advt Revenue Circ. Revenue Revenue from others
Source: Company, Angel research

FY2009 552 526 23 3 195 187 5 4 78 58 19 825

FY2010 638 600 34 4 214 204 6 4 90 73 16 942

FY2011 FY2012E FY2013E 766 712 47 7 221 209 6 6 107 126 102 24 1,221 859 788 61 10 226 212 7 6 120 134 117 18 1,339 926 843 71 12 236 222 8 6 136 155 137 18 1,453

CAGR 9.9 8.8 22.6 28.2 3.3 3.0 12.5 1.9 13.0 10.6 15.6 (13.6) 9.1

10.6 7.8 148.5 90.6 7.9 6.2 219.0 (4.7) 11.3 4.4 39.5

15.7 14.0 49.5 65.9 9.4 9.5 8.0 7.0 15.4 25.6 (15.9)

20.1 18.7 39.3 63.1 3.4 2.2 10.0 60.5 41.3 39.1 51.3

12.0 10.7 27.6 40.3 2.0 1.8 10.0 2.6 12.9 6.3 14.2 (27.1)

7.9 7.0 17.7 17.2 4.5 4.3 15.0 1.2 13.1 15.1 17.0 2.3

66.9 23.7 9.4

67.8 22.7 9.5

62.8 18.1 10.4

64.1 16.8 10.0

63.8 16.2 10.7

July 29, 2011

Jagran Prakashan | 1QFY2012 Result Update

Exhibit 7: Peer valuation

Company HT Media Reco
Accumulate

Mcap (` cr)
3,742

CMP (`)
159

TP (`)
177

Upside (%)
11.2

P/E (x) FY12E

19.0

EV/Sales (x) FY12E

2.0

RoE (%) FY12E

14.7

CAGR Sales
12.9

FY13E
17.0

FY13E
1.8

FY13E
14.4

PAT
13.0

Jagran DB Corp.

Buy Buy

3,590 4,546

114 248

145 302

27.7 21.7

15.7 15.9

14.1 13.4

2.8 2.9

2.6 2.5

33.2 29.0

34.4 28.7

9.1 12.6

10.1 8.7

Source: Company, Angel Research

Exhibit 8: Angel vs. Consensus estimates

Top line (` cr) Angel estimates Consensus Diff (%)
Source: Company, Angel Research

FY2012E 1,413 1,458 (3.1)

FY2013E 1,586 1,684 (5.8)

EPS (`) Angel estimates Consensus Diff (%)

FY2012E 14.1 14.5 (2.5)

FY2012E 16.8 16.7 0.5

Exhibit 9: Return of Jagran Prakashan vs. Sensex

130% 120% 110% 100% 90% 80% Sensex Jagran

Exhibit 10: One-year forward P/E band

200 180 160 140 120 100 80 60 40 20 Jan-07 Apr-07 Jul-06 Jul-07 Apr-06 Oct-06 Oct-07
10x 15x 20x 25x

Aug-10

May-11

Jun-11

Jul-10

Dec-10

Jan-11

Nov-10

Mar-11

Sep-10

Feb-11

Apr-11

Oct-10

Jul-11

Share Price (`)

Jan-08

Jan-09 Apr-09

Jan-10 Apr-10

Oct-08

Oct-09

Source: Company, Angel Research

Source: Company, Angel Research

July 29, 2011

Oct-10

Jan-11 Apr-11

Apr-08 Jul-08

Jul-09

Jul-10

Jagran Prakashan | 1QFY2012 Result Update

Profit & Loss Statement (Consolidated)

Y/E March (` cr)
Gross sales Less: Excise duty Net Sales Total operating income % chg Total Expenditure Cost of Materials SG&A Expenses Personnel Others EBITDA % chg (% of Net Sales) Depreciation& Amortisation EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) Share in profit of Associates Recurring PBT % chg Prior Period & Extra Exp/(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) Add: Share of earnof asso Less: Minority interest (MI) PAT after MI (reported) ADJ. PAT % chg (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg

FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E

750 750 750 25 586 295 92 91 107 164 37 22 34 130 35 17 6 22 15 146 27 146 48 33 98 98 98 29 13 3 3 29 823 823 823 10 667 341 93 107 126 157 (4) 19 38 118 (9) 14 6 23 17 135 (7) 135 44 32 92 92 92 (7) 11 3 3 (7) 942 942 942 14 660 296 99 121 144 282 80 30 51 232 96 25 7 34 13 259 92 259 83 32 176 176 176 92 19 6 6 92 1,221 1,221 1,221 30 864 390 120 173 182 357 26 29 65 291 26 24 9 26 8 308 19 2 306 98 32 208 208 210 20 17 7 7 19 1,339 1,339 1,339 10 945 415 131 199 199 394 10 29 69 325 12 24 8 25 7 342 11 342 113 33 229 229 229 9 17 7 7 9 1,453 1,453 1,453 8 1,024 453 141 215 215 428 9 29 78 350 8 24 7 24 7 368 7 368 113 31 255 255 255 11 18 8 8 11

July 29, 2011

Jagran Prakashan | 1QFY2012 Result Update

Balance Sheet (Consolidated)

Y/E March (` cr) SOURCES OF FUNDS Equity Share Capital Preference Capital Reserves& Surplus Shareholders Funds Minority Interest Total Loans Deferred Tax Liability Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Current Assets Cash Loans & Advances Other Current liabilities Net Current Assets Misc Exp Total Assets 392 135 257 48 183 307 37 77 193 124 183 671 480 151 328 71 157 360 83 87 190 162 198 753 564 194 369 25 167 417 85 98 235 186 231 792 729 260 469 36 167 434 (1) 128 307 234 200 872 765 329 436 38 167 524 45 142 337 268 255 897 870 407 463 43 167 553 30 155 368 295 259 931 60 479 539 79 53 671 60 500 560 141 52 753 60 552 612 121 58 792 63 605 668 146 58 872 63 649 712 126 58 897 63 704 767 106 58 931 FY2008 FY2009 FY2010E FY2011 FY2012E FY2013E

July 29, 2011

Jagran Prakashan | 1QFY2012 Result Update

Cash Flow Statement (Consolidated)

Y/E March (` cr) Profit before tax Depreciation Change in Working Capital Interest / Dividend (Net) Direct taxes paid Others Cash Flow from Operations (Inc.)/ Dec. in Fixed Assets (Inc.)/ Dec. in Investments Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Interest / Dividend (Net) Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances FY2008 FY2009 FY2010E 146 34 (33) (6) 48 6 98 (68) (39) (106) (28) 35 (6) (56) (65) 101 37 135 38 (7) (2) 44 16 136 (111) 27 (84) 62 70 (2) (6) 46 37 83 259 51 (12) (9) 83 (21) 185 (38) (10) (48) (20) 123 (9) (135) 2 83 85 FY2011 FY2012E FY2013E 310 65 (61) (1) 98 (1) 215 (177) (177) 25 155 (9) (121) (84) 85 (1) 342 69 (20) (0) 113 5 283 (38) (38) (20) 185 (5) (200) 46 (1) 45 368 78 (24) (0) 113 1 310 (110) (110) (20) 200 (5) (214) (15) 45 30

July 29, 2011

Jagran Prakashan | 1QFY2012 Result Update

Key Ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value DuPont analysis EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post-tax) Leverage (x) Operating ROE Returns (%) RoCE Angel RoIC (Pre-tax) RoE Turnover ratios (x) Asset Turnover Inventory / Sales (days) Receivables (days) Payables (days) Net Working capital (days) Solvency ratios (x) Net Debt to equity Net Debt to EBITDA Interest Coverage (0.3) (0.9) 21.7 (0.2) (0.6) 20.1 -0.2 -0.5 35.3 0.0 -0.1 32.1 -0.1 -0.2 41.5 -0.1 -0.2 53.1 1.9 16.9 77.2 40.8 71.2 1.7 14 70 39 51 1.7 20.7 70.2 50.2 56.6 1.7 22.8 68.9 48.5 60.1 1.8 24.3 67.6 49.4 57.5 1.7 26.1 66.4 49.6 57.4 19.6 30.2 18.7 16.6 24.5 16.7 30.0 43.9 30.0 35.0 46.7 32.5 36.7 46.7 33.2 38.3 49.3 34.4 17.4 0.7 1.7 20.4 0.0 (0.3) 14.9 14.4 0.7 1.7 16.6 0.0 (0.2) 13.0 24.6 0.7 1.8 29.8 0.0 -0.2 24.0 23.9 0.7 2.0 31.9 0.0 -0.1 28.1 24.3 0.7 1.9 31.3 0.0 -0.1 29.0 24.1 0.7 2.0 34.2 0.0 -0.1 30.1 3.3 3.1 4.4 2.0 17.9 3.0 2.9 4.3 2.0 18.6 5.8 5.6 7.5 3.5 20.3 6.6 6.6 8.6 4.2 21.1 7.2 7.2 9.4 5.0 22.5 8.1 8.1 10.5 5.4 24.3 36.6 26.0 6.3 1.8 4.8 22.2 5.4 39.2 26.3 6.1 1.8 4.4 23.3 4.8 20.4 15.1 5.6 3.1 4.0 13.2 4.6 17.1 13.1 5.4 3.7 3.1 10.5 4.3 15.7 12.0 5.0 4.4 2.8 9.5 4.1 14.1 10.8 4.7 4.8 2.6 8.7 3.9 FY2008 FY2009 FY2010E FY2011 FY2012E FY2013E

July 29, 2011

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Jagran Prakashan | 1QFY2012 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

Jagran No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to 15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

July 29, 2011

11