Most analysts expect the media sector to have a better second half in the financial year with an expected growth rate of 18-20% and predict that industry leaders would out-perform the industry by 200-300 basis points. Companies such as PVR , Entertainment Network , Zee Entertainment and Jagran Prakashan are expected to perform exceedingly well in the third quarter and post superb results. Jagran Prakashan has divided its businesses among two divisions — print and radio. The print segment has been doing exceptionally well. It has 11 publications across 5 languages spread across numerous states and with a circulation of around 5 million daily, it is the most circulated newspaper in the country. From a margin perspective, since the news print and pulp prices are coming down, the company expects the margin to sustain around 28%. With the kind of strong presence the newspapers command in the Hindi speaking belt of Bihar, Uttar Pradesh, Madhya Pradesh, NCR and Punjab, a minimum top line growth of around 15% is easily sustainable over the next couple of years. While Entertainment Networks Ltd has over 50% market share in terms of the radio population of 66 million, Jagran Prakashan’s 20 radio stations across seven states have a lot of scope of growth. With the gradual improvement in the economy and higher operating leverage kicking in, the acquisition of Radio City by the company is showing continuos improvement in fundamentals but still away from its potential. The profit margin of the Radio business is exceptionally good at 22% and with increasing growth seen in the advertising revenue, the Jagran stock is poised to show an upside in the near future. At the current market price of Rs 142 the stock trades at 16 times the forward EPS and dividend yield of 2.8% and healthy ROCE of 28%, it is an excellent buy for medium term price appreciation with a target price of Rs 185.
The key benchmark equity indices ended higher on Friday marking the first weekly rally in 4 weeks. However, the gains were cut short as the rating agency Standard & Poor warned the government that a sustained high fiscal deficit may delay any improvement in the country’s sovereign credit rating over the next one year. Agencies have also cautioned that the proposal to increase salaries of government employees may upset India’s fiscal consolidation plans. On the other hand, the government is confident and optimistic that it will stick to the fiscal road map laid down and fiscal prudence has not been compromised. While the impact of the new pay commission was broadly expected by the government and hence, internally a kind of risk matrix has been prepared to absorb it. Moreover, it is confident that this will ultimately boost consumption and saving for the economy.
While the stock market index Nifty has fallen from 8,300 levels to 7,850 levels during the last two months, it looks that it may settle down in a range next week on the back of low volumes and F&O expiry settlement.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.