Buy DB Corp; target of Rs 302: Angel Broking

Angel Broking is bullish on DB Corp and has recommended buy rating on the stock with a target of Rs 302 in its July 21, 2011 research report.

“DB Corp. (DBCL) reported a mixed performance on the revenue and earnings front. The company’s top-line growth was driven by impressive ad and circulation revenue. Earnings for the quarter declined due to losses because of the new launches.”

“DBCL reported steady top-line growth of 18.4% yoy, driven by 20% yoy growth in print ad revenue and 18% yoy growth in radio ad revenue. Circulation revenue was higher by 5.8% yoy and 6.4% qoq on account of new launches in Jharkhand with Dhanbad edition and the company’s foray into Maharashtra with the launch of Aurangabad and Nasik editions. In terms of earnings, DBCL posted a decline of 14.8% yoy on a recurring basis and 14.8% yoy growth on a reported basis, primarily due to losses in new edition launches. Gross margin contracted by 561bp yoy due to heavy consumption of newsprint towards the launch of the new editions. On a sequential basis, earnings grew strongly by 35.8% with a mere 64bp qoq gross margin contraction.”

“We maintain our earnings estimate and have factored in the increase in newsprint price and higher number of loss-making editions. At the CMP of Rs224, DBCL is trading at 13.4x FY2013E consolidated EPS of Rs16.8. We maintain our Buy view on the stock with a target price of Rs302, based on 18x FY2013E earnings, which is in-line with its historical trading average since the company’s listing. Downside risks to our estimates include – 1) any further rise in newsprint prices, 2) competition becoming fierce and 3) higher-than-expected losses/increase in the breakeven period of its new launches,” says Angel Broking research report.