DB Corp’s fourth-quarter consolidated revenues grew by 6.9% y-o-y to Rs 486 crore (1.7% below estimate) and Ebitda by 14.2% y-o-y to Rs 120 crore (13.3% below estimates due to lower than expected print ad growth of 1.3% yoy and higher ‘other expenses’). PAT came in 20% below estimates, at Rs 6,400 crore (+5% y-o-y on adjusted base).
Print ad revenue grew by just 1.3% y-o-y as DB Corp sacrificed low yield volumes to improve overall yields (else ad growth would have been 3.5% y-o-y). Subscription revenue grew by a strong 17.4% y-o-y, led by cover price increase.
Radio revenue posted strong 25.4% y-o-y growth.
Key positives include strong growth in radio revenue and y-o-y decline in newsprint price. Lower ad growth and higher other expenses constitute the key negatives. We are reducing FY16e/17e EPS by 5% to build in lower ad growth of 9% in FY16e (11% earlier). FY17e ad growth remains unchanged, at 15%.
DB Corp’s strategy of improving yields will keep it in good stead when ad volumes revive, but would hit near-term growth. We are not perturbed yet and appreciate the value of this strategy in the medium term. Opex investment to ramp up digital readership is also welcome despite it not being monetisable upfront. Falling newsprint price cushions the impact of these two strategies, and operating leverage would play out when ad growth revives. We expect an earnings CAGR of 20% over FY15-17e. We maintain outperformer with a revised price target of R451.