Jagran Prakashan (JPL) delivered strong growth as expected – top-line grew by 26%YoY, led by advertisement growth of 31%YoY to Rs1.95bn (in line with our estimate) and circulation revenue growth of 7.2%YoY to Rs570mn. Event and outdoor business grew by 20%YoY (10% of total sales).

Strong ad growth of 31% in line with the estimate

With shift of festive season in Q3FY11 Ad revenue grew remarkably 31%YoY (in line with its peers) to Rs1.95bn – both on the volume front and improved yields during festive season. Circulation (copies) increased by 10%YoY however decrease in cover prices capped the circulation revenue growth at 7%YoY and 4% QoQ to Rs570mn.

Positive traction from other businesses

Event and outdoor business grew by 20%YoY to Rs252mn – Event business showed growth of 30%YoY with PBT of Rs14mn (as against loss of Rs3.6mn), Outdoor business also delivered positive PBT of Rs9.8mn (against a loss of Rs1.5mn). Digital revenue in Q3FY11 grew to Rs22.5mn. Post acquisition of Mid-Day by JPL, Mid-Day Mumbai circulation has improved by 8%.

Enhanced operating margins and improved profitability

Despite 21% increase in total expenditure (where in the newsprint cost increased 28%YoY), Operating profit grew 38%YoY to Rs897mn and OPM surged from 28.8% in Q3FY10 to 31.4%, owing to robust growth from advertisement revenue. On account of high newsprint prices and increased circulation copies we estimate OPM of ~32% for FY11E and FY12E. Even with increase in interest cost and lower other income, PAT grew by 33% to Rs526mn resulting in an increase in NPM to 18.5% from 17.5% in Q3FY10.

OUTLOOK AND VALUATIONS

We believe JPL is well poised to capture the growth opportunity in its markets and across the business segments. Considering its numero uno position in readership (54.7mn total readership), leadership in the largest print ad market – UP and positive traction from other media verticals, we expect the company to post revenue and PAT growth of 20% and 22% 2Yr CAGR (FY10-12E) respectively. At the CMP, the stock trades at 15xFY12E EPS. We maintain ‘BUY’ recommendation on the stock with a target price of Rs165 (20xFY12E EPS).