India Equity Research I Media &Entertainment Event Update

DB Corporation Limited INR:258

Entering into lucrative market BUY

Expansion into newer regions Price Outlook (INR): 286

DB Corp announced its expansion plan into newer regions on March 25, 10. The company
would be launching its flagship brand Danik Bhaskar in Bihar, Jharkhand and Jammu by the
Market Data March 26, 2010
end of CY10. Bihar & Jharkhand market would be first market where 3 listed peers; Jagran
Shares outs (Cr) 18.15
(Danik Jagran), HTML (Hindustan) and DB Corp (Danik Bhaskar) would be competing for the
Equity Cap (Rs. Cr) 181.5
pie.
Mkt Cap (Rs. Cr) 4,683
Key Highlights of Analyst meet
52 Wk H/L (Rs) 274.6/207.4
Growth to be driven by larger penetration gap -As per the Indian Readership Survey, Bihar Avg Vol (1yr avg) 6,22,343
market is dominated by two players, Hindustan with 43 lakhs readers and Dainik Jagran with
Face Value (Re) 10.0
a readership base of 23 lakhs. Both the players share the majority of the Rs. 200 crore
Bloomberg Code DBCL. IN
advertising market of Bihar & Jharkhand among themselves. With the rapid strides being
made by Bihar with the State GDP growing at 11.0% compared to national average of 8.49%
and with a readership penetration of just 18%, the advertising spends can only go up. We Market Info:
believe that entry of Dainik Bhaskar will help in this by increasing the penetration level & SENSEX 17,650

advertising spend to increase by 20% CAGR for the next 3-4 years to Rs. 400 crores. NIFTY 5,283

Proven innovative launch strategy - DB Corp has used innovative strategies to penetrate Price Performance
regional markets and compete with the local newpapapers. The success of this strategy was 105.0
reflected in Gujarat, Jaipur, Chandigarh, etc. This experience in competing with the 100.0
established players in the previous markets would help company in gaining traction very 95.0
early in the new markets. Company generally has used lower pricing as an entry strategy in 90.0
earlier markets. In Bihar, the cover price is Rs 4.00 for the existing players while DB group 85.0
generally has the price range of Rs 1.5-2.00 providing them ample opportunity to adopt the 80.0
same strategy in these markets.

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Marginal impact on balance sheet - Entering into new territories would lead company to DBCORP Sensex

incur capex of Rs 70-75 crore towards building necessary infrastructure. Historically, it is

observed that it takes four years for the company to breakeven in its emerging editions. The
total losses in four years would be Rs 80 crore (Rs 20 crore per year). Despite having losses Share Holding pattern (%)
in the newer editions, we expect company to maintain their operating margins at 30-32% as Particulars Dec-09 Sep-09 Chg
losses from the 16 emerging editions would reduce from Rs 59 crore in FY09 to Rs 21 core in
Promoters 86.4 NA -
FY10 and are expected to turn profitable by FY11
Institutions 2.5 NA -
Valuations & Views
At the CMP of Rs 258, the stock is trading at 17.9x FY11E EPS of Rs 14.4 and 12.1x FY12 P/E FII 7.1 NA -

EPS of Rs 17.1. We assign a Hold rating to the stock with 12-month target price of Rs Public/Others 4.0 NA -
286.0, based on our SOTP valuation, representing upside potential of 12.4%. Total 100.0 NA -

Key Financials
Particulars (Rs in crore) FY09 FY10E FY11E FY12E Analyst :

Revenues 961.0 1099.9 1276.5 1471.5 Rohit Maheshwari

EBITDA 147.3 375.4 442.6 513.5 rohit.maheshwari@krchoksey.com
℡ 91-22-6696 5574
Net Profit 47.6 206.9 261.4 311.0
EPS 2.6 11.4 14.4 17.1
EV/EBITDA 98.4 22.6 17.9 15.1
P/E 14.5 5.8 4.4 3.5
www.krchoksey.com
P/BV 35.0 13.7 11.6 10.0 ℡ 91-22-6696 5555
ROE 23.48% 38.48% 28.90% 26.45% ¬ 91-22-6691 9569
Source: Company, KRC Research

KRC Research is also available on Bloomberg KRCS<GO>, Thomson First Call, Reuters, Factset and Capital IQ
DB Corp Limited

Exhibit 1: Key Statistics of Markets – Bihar & Jharkhand Exhibit 2: Presence of DB Corp

Particulars Bihar Jharkhand

State Capital Patna Ranchi
Area (Sq.km) 94,163 79714
Population 9,38,00,000 3,00,00,000
Literacy 52% 0.59
Per Capita Income of
Rs 21,079 52860
Urban HH
Per Capita Income of Rural
Rs 9,433 18362
HH
Male Population. 4,88,40,500 1,54,55,951
Female Population 4,49,59,500 1,45,44,049
No. of Districts 37 18
Flagship brand “Danik bhaskar”
No. of Towns 130 130 to be launch in Bihar, Jharkhand
Source: Company Presentation & Jammu by end of CY10.

Exhibit 3: Large Penetration Gap in Key regions of Bihar & Jharkhand

Particulars (in lakhs) Bihar Patna Jharkhand Ranchi Jamshepur Dhanbad
Base Populations 660.00 17.67 219.00 8.70 10.88 9.96
Literacy 340.00 13.72 129.00 7.31 9.26 7.88
Literacy rate (%) 51.5% 77.6% 58.9% 84.0% 85.1% 79.1%
Can Read Hindi (CRH) 330 13.65 120 7.26 8.89 7.46
Any Hindi Daily (AHD) 58.47 5.52 24.1 3.35 3.21 2.17
Penetration Gap (%) 82.0% 60.0% 80.0% 54.0% 64.0% 71.0%

Source: Company Presentation

2 KRC Equity Research

DB Corp Limited

Rajiv Choksey Co-Head Institutional Equities rajiv.choksey@krchoksey.com +91-22-6653 5135

Anuj Choksey Co-Head Institutional Equities anuj.choksey@krchoksey.com +91-22-6696 5500

Maulik Patel Head Research maulik.patel@krchoksey.com +91-22-6696 5574

DB Corp
Rating Legend

270
Our Rating Upside
260
Strong Buy More than 25%
250
Buy 15% - 25%
240

Hold 10% - 15%

230

220
Reduce Nil – 10%
3-Feb

17-Feb
6-Jan

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3-Mar

17-Mar

Sell Less than 0%

Other Stocks in the sector under our active coverage: Media and Entertainment

Ticker Company Recom As of Return Bmk Outper BARR

Summary Coverage 8 Avg Rating: 4.1 61.1% 22.7% 38.4%

DQE IN DQ Entertainment International Ltd Subscribe 03/08/10

PVRL IN PVR Ltd Hold 02/16/10 147.35% 63.04% 84.32% 4th

DBCL IN DB Corp Ltd Buy 02/05/10 12.42% 8.20% 4.22% 3rd

JAGP IN Jagran Prakashan Ltd Buy 01/29/10 95.68% 33.91% 61.77%

SUNTV IN Sun TV Network Ltd Hold 01/21/10 89.18% 28.75% 60.44% 3rd

HTML IN HT Media Ltd Buy 01/20/10 11.59% 4.57% 7.02%

Z IN Zee Entertainment Enterprises Ltd Hold 01/19/10 21.93% 13.93% 8.00%

NDTV IN New Delhi Television Ltd Accumulate 10/15/08 49.85% 6.54% 43.31% 2nd

3 KRC Equity Research

DB Corp Limited

Disclaimer:
This publication has been prepared solely for information purpose and does not constitute a solicitation to any person to buy or sell a
security. While the information contained therein has been obtained from sources believed to be reliable, investors are advised to
satisfy themselves before making any investments. Kisan Ratilal Choksey Shares & Sec Pvt Ltd., does not bear any responsibility for the
authentication of the information contained in the reports and consequently, is not liable for any decisions taken based on the same.
Further, KRC Research Reports only provide information updates and analysis. All opinion for buying and selling are available to investors
when they are registered clients of KRC Investment Advisory Services. As per SEBI requirements it is stated that, Kisan Ratilal Choksey
Shares & Sec Pvt Ltd., and/or individuals thereof may have positions in securities referred herein and may make purchases or sale
thereof while this report is in circulation.

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Kisan Ratilal Choksey Shares and Securities Pvt. Ltd.

Registered Office:
1102, Stock Exchange Tower, Dalal Street, Fort, Mumbai – 400 001.
Phone: 91-22-6633 5000; Fax: 91-22-6633 8060.

Branch Office:
ABHISHEK, 5th Floor, Link Road, Dalia Industrial Estate, Andheri (W), Mumbai – 400 058.
Phone: 91-22-6696 5555; Fax: 91-22-6691 9576.

4 KRC Equity Research