Buy DB Corp; target of Rs 445: Centrum
Centrum’s research report on DB Corp
We maintain our BUY rating on DB Corp with a target price of Rs445 as we value the company based on our conservative Adj. OCF based methodology. We believe the ad growth has bottomed out and expect an uptick in H2FY18 as key sectors begin to advertise. Real Estate is expected to bounce back as RERA has been notified in most of the key states. Further management strategy on increase circulation would pay dividends and help in ad growth in medium term coupled with strengthening market share. Stable newsprint cost and prudent cost management is an added positive.
We have marginally reduced our revenues by 1.3% for FY18E on lower ad growth while operating profit has been reduced by 5.1%/1.2% for FY18E/FY19E on higher RM cost and other expenses. PAT has been reduced by 4.6%/1.6% on lower operating profit. We maintain BUY rating on the stock, with a TP of Rs445 as we value the company on adjusted OCF (AOCF = OCF – Interest) to EV yield based on five year average cash flows. Key downside risks are an increase in newsprint prices coupled with pressure on ad growth.
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