Investor's Eye: Update - Gateway Distriparks; Viewpoint - Jagran Prakashan

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Investor's Eye [April 10, 2014]  Sharekhan www.sharekhan.com

Summary of Contents STOCK UPDATE   Gateway Distriparks Recommendation: Buy Price target: Rs203 Current market price: Rs174   Revival in exim trade and port traffic drives re-rating; price target revised to Rs203   Key points An improvement in exim trade (a 4.8% Y-o-Y growth in exports during April-February 2014) along with a rise in port traffic at the major ports (a 1.8% Y-o-Y growth in FY2014 as against a 2.6% rise in FY2013) are signaling an improving business environment for the logistic companies. Gateway Distriparks Ltd (GDL) being a major player in the CFS and rail logistics segments is expected to witness an improvement in volumes of its CFS and rail divisions going ahead. GDL has appreciated by over 25% over the last three months. In addition to the improving macro data-points, the move to unlock the value in its subsidiary (Snowman Logistics, through a possible public offering) has gone down well with investors. GDL, a leading and well managed logistic company, would benefit from any possible uptick in its core business (driven by exim trades) and is our preferred pick in the logistic sector.  We have factored in a potential improvement in the volumes of the CFS and rail divisions post-FY2015 to be brought about by a recovery in the macro-economy that will support business growth. Consequently, we have revised our price target for the stock to Rs203. We maintain our Buy recommendation on the stock. VIEWPOINT   Jagran Prakashan Current market price: Rs103 View: Positive   Undemanding valuation; strong Q4 ahead   Key points After almost a decade of muted performance, we expect the tide to turn for the print media sector with the print advertisement cycle expected to turn favourable in the next two years. Also, an improvement in the macro environment will lead to an improvement in advertisement spends across the sectors, like FMCG, real estate and government spending, and also in laggard categories, including automobiles, household consumer durables and education.  Jagran Prakashan (Jagran), with its strong brand franchisee, is among the key beneficiary of a secular improvement in the advertisement spends environment in FY2015E and FY2016E. It would also benefit from the general election spends in Q4FY2014 and Q1FY2015. Also, a decline in the newsprint prices would start to reflect positively in the margins from Q1FY2015 onwards. Further, a turnaround of Nai Dunia and Mid-day publications in FY2015 would be an additional trigger for the company (these publications contribute 26% of Jagran's consolidated revenues).  For Q4FY2014, though on a Y-o-Y basis, the numbers are not strictly comparable with Q4FY2013 as the numbers include Nai Dunia's financials (in the stand-alone numbers). Nevertheless, we expect a 22% Y-o-Y growth in the revenues led by a robust advertising revenue growth and a strong margin expansion of around 350bps YoY. On an adjusted basis, excluding the extraordinary items in Q4FY2013, the net income is expected to grow by 18% YoY to Rs47.5 crore.  Jagran is expected to deliver a 15% earnings CAGR over FY2014-FY2016. Given its strong regional brand franchisee, the stock trades at an undemanding valuation of 11x FY2016 earnings estimate (at a 28% discount to its five-year average PER). We expect in the next 8-12 month timeframe, the stock offers a decent upside of 20-25% (Rs120-125 levels based on 13.5-14x FY2016E earnings) and is a play on the strong Q4FY2014 results.  Risks: (1) An increase in the competitive intensity in key markets given the recent launches of Nav Bharat Times (Lucknow, UP) and Dainik Bhaskar (Patna, Bihar); and (2) a delay in the turnaround of Nai Dunia and Mid-day publications could impact the profitability.   Click here to read report: Investor's Eye   Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.

Regards,  The Sharekhan Research Team

 

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