Jagran Prakashan (JP) publishes nine newspapers with more than 100 editions across 14 states. Its flagship, Dainik Jagran, is the world's largest daily with a readership of 15.91 million across North India. JP's print business accounts for 88.7 per cent of its topline (FY11). Its out-of-home (OOH or outdoor advertising) business covers over 900 towns in 27 states across the country, and brings in 8.4 per cent of revenue.
Higher ad revenue. JP recently hiked its advertising rates by 12-15 per cent. This will boost revenue since the festive season, which sees the maximum advertising spend, is near. Moreover, Hindustan Times and The Times of India recently increased the cover price of their Tuesday and Wednesday editions by 50 paise. JP's management could follow suit.
Mid-Day's acquisition. JPL acquired the print business of Mid Day Multimedia Ltd. in Q4 FY11. It is the country's largest afternoon paper that sells chiefly in Mumbai and Gujarat. Thus JPL has acquired four established titles: Mid-Day (circulation one lakh), Sunday Mid Day, Gujarati Mid Day (50,000 copies) and The Inquilab (50,000 copies). The addition of these brands will boost both topline and bottomline from the current year itself.
UP elections. The upcoming UP elections will see a lot of local and regional advertising. Given its dominance in the Hindi belt, it is likely to gain the maximum from these elections.
Risks. Corporate ads and OOH spending have yet to pick up. The usual big spenders - realty, banking and finance, automobiles and consumer durables - are struggling due to high inflation, high interest rates and the global financial turmoil. This slowdown could continue well into the second or third quarter of the current financial year.
Other risks. Competition has increased with DB Corp recently entering Bihar, one of JP's strongholds. Increase in the price of paper could impact profitability as passing on higher costs to readers is difficult.
The stock trades at a P/E of 16.62 which is lower than its five-year median P/E of 22.17. Over the past five years, earnings per share has grown at the rate of 43.96 per cent annually. The stock trades at a PEG ratio of 0.36. You may invest in it with at least a three-year horizon.