a) My hunch is - ad biz in India is going to rebound much more strongly than anybody anticipates. Last year, media companies reduced ad rates as ad buyers stepped back fearing a recession. So media companies faced a volume AND price decline. Advertising is like real estate and commodities in that respect - volume and price both go up and down at the same time.
Now, the thing is - India continued to grow at 6%. This year, ad buyers are back - real estate, IPO, financial services are getting back on their feet. Media companies are now seeing more volumes, but they haven't pressed the button on prices. Sooner or later, they will.
b) Analysts are modelling just volume growth and not pricing growth - at least for Jagran. That will prove a bit conservative - maybe a bit too much.
c) The biggest swing factor for newspaper EPS is the newsprint prices. Currently they are rock bottom. This has benefited Jagran. If they go up substantially, this will be -ve. What I am hoping is that they don't go on a rocket fire here.
d) It can easily do Rs 5.5 EPS this year, if newsprint prices remain within bounds. So the stock is trading at 19x. While it might look high, remember that Indian consumer staples are trading at 25x. They are unlikely to beat consensus estimates - while a consumer discretionary (media) can.
e) Will Indian newspapers go the way of their US counterparts? There are a couple of analysts who argue that they do not structurally like the newspaper industry, considering what is happening to newspapers in the West. What they forget is that newspaper circulation peaked in US in 1984. Till 2000, newspapers remained in fine shape. There is zero threat of Internet to the local language newspaper industry in India - till the time Internet content is predominantly English.
Disclosure - Own Jagran.
So here is how it is now. Consumer - Jagran, Godfrey Phillips, a little bit of GSK Consumer. Financials - Shriram Transport, Crisil. Manufaturing - FAG Bearings. A little bit of this and that. Biggest risk is in Crisil - Moody's (MCO) chart gets scarier by the day.