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Regional Newspaper Leader

DB Corp's regional push is promising payoffs. It is already one of the widest newspaper publishers & softening raw material prices should boost margins ahead

DB Corp or the more commonly known as Dainik Bhaskar group is India's largest newspaper publisher that runs eight newspapers including the well-known Dainik Bhaskar - the second largest read newspaper in the country. DB publishes 65 editions in four languages - Hindi, Marathi, Gujarati and English and has circulation in over 13 states. Here are DB Corp's growth drivers:

Regional spread paying off. DB has expanded operations across the country and is now the number one newspaper in Madhya Pradesh, Haryana, Chandigarh and Chhattisgarh. In the last two years, it launched editions in Patna, Jharkhand and Maharashtra. The latter two are expected to break-even at the Ebitda level this financial.

Ad growth. A politically charged year ensured that despite slow economic growth, its ad revenues grew by seven per cent (y-o-y) in Q2 following a similar growth in Q1FY15. An improvement in the economy led by maturing of newer editions is expected to drive print-ad revenues up (newspapers as a general rule earn more as they gain maturity).

Radio making its mark. Radio may appear nondescript to a city-dweller but it makes big bucks for DB that reported radio revenue of `80 crore in FY14 - a growth of 20 per cent (y-o-y). Radio is still going strong. Q2FY15 saw a growth of 30 per cent (y-o-y).

Margins to go up. Newspaper publishers have two major costs - raw material and launches of new editions. Newsprint costs are down two per cent on a q-o-q basis with softening international prices. Ebitda margin expanded 113 basis points to 27.5 per cent on lower raw material price and lower operating losses in newer editions.

Risks. Longer breakeven time for new editions is a major risk to bottomline besides raw material price fluctuation.

Outlook and valuation. DB has made its mark in the vernacular regions. Its newer editions have started turning around - reporting lower losses. The environment for ad revenues appears improving. Circulation revenues up 15 per cent in Q2 should go higher as newer editions mature. DB it appears is set to make more money this year than last year. At the current price, DB Corp trades at 20 times its ttm earnings. Buy.