D B CORP

Godzilla of Indian print media!

DB Corp is India’s largest print media company that publishes 5 newspapers, with Dainik Bhaskar-43 editions, Divya Bhaskar-8 editions and Divya Marathi-6 editions, with 210 subeditions in 3 multiple languages (Hindi, Gujarati and Marathi) across 12 states. Its flagship newspapers, Dainik Bhaskar (Hindi), established in 1958, Divya Bhaskar and Saurashtra Samachar (Gujarati), and Divya Marathi (Marathi) have a total readership of 6.67 crore, making it the most widely read newspaper group in India with a presence in Madhya Pradesh, Chhattisgarh, Rajasthan, Haryana, Punjab, Chandigarh, Himachal Pradesh, Delhi, Gujarat, Maharashtra, Bihar and Jharkhand. The group’s other noteworthy newspaper brands are Saurashtra Samachar and DB Star.

DBCL is the only media conglomerate that enjoys a leadership position in multiple states in multiple languages, and is a dominant player in all its major markets. The company’s other business interests also span the radio segment through the brand ‘94.3 MY FM’ radio station with a presence in 7 states and 30 cities. Its growing digital business is led by 4 portals for rapidly expanding digital audiences, and 3 actively downloaded mobile applications

Over the past 10 quarters, the company has consistently delivered strong results, maintaining a trajectory of continuous growth. What’s particularly encouraging is that this quarter’s year-on-year growth was achieved on a comparatively higher base. What is more, prospects going ahead are all the more encouraging. Consider:

• The good results can be attributed to several factors, including the sustained growth of advertisement revenue, softening trends in newsprint prices and well-executed cost control and optimization measures. The sustained growth in both the topline and bottomline across all business segments reaffirms its confidence that happy days are indeed back for the print business.

• For Q3FY24, consolidated advertising revenues grew 18% YoY to Rs 481.9 crore. EBITDA soared 102% YoY to Rs 203.1 crore. EBITDA margin expanded by an impressive 1,400 basis points to 31% from 17% last year. Average cost per newsprint has reduced from the high of Rs 63,500 per metric ton in Q2FY2023 to around Rs 51,500 per metric ton in Q2FY2024, and now to approximately Rs 50,000 per metric ton in Q3FY2024. The management expects newsprint purchase prices to remain soft in the next 1-2 quarters. PAT grew 157% YoY to Rs 124 crore.
• For the nine months, consolidated advertising revenue grew by 16% YoY to Rs 1,306.6 crore. Total revenue grew 13% YoY to Rs 1,840.3 crore. EBITDA grew 86% YoY to Rs 506.6 crore. PAT grew 137% YoY to Rs 303.0 crore.

BEST-IN-CLASS

Overall, it has been a very encouraging quarter, and the management remains committed to delivering high-quality content and engaging experiences, ensuring that readers continue to find value in their favourite brand, Dainik Bhaskar

• For its digital business, Dainik Bhaskar continues its focus on building the best-in-class, ad-free user experience on its digital app while maintaining high-quality, insightful and engaging content. The Omni channel presence has been very important, and the management sees the digital presence as a strong supplementary pillar of growth for the company.

• With around 13 million users as of December 2023, the company is extending its leadership position and cementing its place as a dominant digital leader with the number one Hindi and Gujarati news apps. Its radio segment has been delivering industry-leading EBITDA margins. Radio grew 28% YoY to Rs 46.4 crore, while EBITDA grew 56% YoY to Rs 18.3 crore. In FY 2024, we expect the company to register EPS of Rs 57.5 which is likely to rise to 57.9 in FY 2025. For FY 2026 the company can be expected to register EPS of Rs 58.8. The scrip trades at Rs 278. P/E on FY 2026 EPS works out to 10.3.

PERFORMANCE INDICATORS (Rs. in crore)

AVT NATURAL PRODUCTS

Natural' route to biz success:

Global player from 'seed to fork'

South India-based AVT Natural Products is part of the AV Thomas group, a family-owned, well-diversified group of companies with interests in plantations, spices, natural ingredients, consumer products, leather goods and medical devices. The company operates in the business segment of Food & Feed ingredients from natural raw materials. It is engaged in five primary business categories:

1) Marigold extracts for eye care, food colouring and poultry pigmentation
2) Spice oleoresins and oils for food colouring and flavouring
3) Value-added teas decaffeinated teas and instant teas
4) Animal health & nutrition products
5) Rosemary extract

The company has three wholly-owned subsidiaries, namely AVT Natural Europe Ltd, AVT Natural SA De Cv, Mexico and AVT Natural FZCO. AVT Natural Europe Ltd has one subsidiary, AVT Natural North America Inc. The wholly owned subsidiaries are responsible for the sales and marketing activities of value-added teas, animal nutrition products and other natural extracts

Despite a challenging situation during the last couple of years, the company has fared well on the financial front. During the last 12 years, its sales turnover has expanded from Rs 239 crore in fiscal 2012 to Rs 582 crore in fiscal 2023 with operating profit inching up from Rs 90 crore to Rs 121 crore and the profit at net level improving from Rs 55 crore to Rs 77 crore. What is more, prospects for the company are much better going ahead. Consider:

• Since its inception in 1986, when the company started its innings with the cultivation of marigold, it has emerged by now among the top players in this segment. Starting with marigold cultivation on 200 acres of land, the cultivation area has been expanded by 1,000 times to over 20,000 acres, producing of around 100,000 tonnes of flowers. Interestingly, the management has decided that marigold will remain a key business segment, contributing to both the top and bottomline. Sustaining growth with a focus on efficiency is key, with low marigold prices and renewed market competition from China. The company will continue to strengthen its agricultural growing base while focusing on process and cost improvements. It will invest continuously to increase capacity to cater to growth in this segment while also improving its compliance practices. New hybrids will be rolled out in a phased manner to ensure sustainable growth in flower volumes. In spice oleoresins and extracts, AVT continues to focus on expanding its customer base and geographical regions, with an increased focus on growing its market for value-added speciality products. Here too, a greater emphasis will be placed on compliance to meet new global norms.

‘FARM TO TABLE’

AVT is one of the very rare suppliers that is vertically integrated - from ‘seed to feed or fork’, including seed selection, breeding, and cultivation for some species of plants. It has state of art extensive in-house extraction technology for the isolation and standardization of high-quality oils, oleoresins and extracts. The company has one of the finest systems and processes in place, having traceability from the farmer to the finished product, adhering to stringent quality checks throughout the processes and enabling it to cater to both food-grade (human consumption) and feed-grade (animal consumption) oleoresin markets. Its dedicated R&D and extraction facilities have the capabilities to offer customised solutions to clients. In its continued bid to diversify away from marigold and develop new ingredients, AVT in FY21 started processing rosemary. Similar to food-grade marigold oleoresins, the company has signed a strategic supply agreement with Kemin Industries for rosemary extract. Rosemary is widely used in the food & beverage industry as a preservative due to its antioxidant and antimicrobial activities. Several studies demonstrate that the antioxidant capacity of rosemary extracts is more effective than that of other conventional antioxidants used in the food industry. Kemin, which currently sources part of its requirement of rosemary from China, will increasingly source from AVT going ahead, with the latter becoming the exclusive supplier in future, as was the case for food-grade marigold oleoresins. This assures a robust volume growth for near term

TALE OF TEA

• With a view to further diversifying its product range, the company ventured into the value-added speciality tea business. Its products included decaffeinated tea and instant tea. In fact, it was the first company to venture into the decaffeinated tea space. This valueadded tea segment continues to be a major growth area for AVT. The company is now investing in new capacity to service its growing list of customers with the aim of doubling the business in the next 2 to 3 years. It is exporting its specialised teas to several countries. Demand for decaffeinated tea is high in developed countries, particularly in Europe. Little wonder that today AVT is the largest player in this tea segment with a 50 per cent global marketshare. The company leveraged its success in decaffeinated tea to venture into instant tea. Thanks to its strong technical knowhow and remarkable product development capabilities, the company has emerged a preferred supplier to some of the most prominent customers, including Unilever, Nestle, Tata Consumer and Coca-Cola. Today, in the case of instant tea, while China is a strong competitor in green tea, AVT is the biggest player in black tea. Instant tea segment has for AVT as it continues to expand its customer base.
• The company’s foray into animal nutrition can be a potential game changer for AVT. While the company was already catering to the animal nutrition market indirectly through the supply of feed-grade oleoresins, its penchant to move up the value chain through strong research and technical capabilities helped it come out with end-to-end solutions where it can partner with clients (livestock providers/ feed manufacturers) to select ingredients, formulate and develop solutions to tackle specifications. Demand for the company’s products and solutions is on the rise globally. Recently, the company has signed an exclusive agreement in Canada with TOUIN Nutrition, a global leader in innovative feed specialities. Demand from other countries has also started growing.

R&D PUSH

• With the growing demand for its products and its rising stature, the company management has envisioned transformation of AVT from a mere solvent extractor to an ingredient solutions provider, backed by higher investment in R&D. In FY 2024, we expect the company to register an EPS of Rs 3.9, which is likely to rise to 6.2 in FY 2025. For FY 2026, the company can be expected to register an EPS of Rs 7.4. The scrip trades at Rs 95. P/E on the FY 2026 EPS works out to 12.9. AVT has equity capital of Rs. 15.23 crore with Re. 1 face value. The promoter group led by Ajit Thomas & family owns 75% and the balance 25% is distributed amongst 48969 public shareholders.

Neelamalai Agro’s Valuation

Interestingly, Neelamalai Agro Industries (NAI) who is one of the promoter group's BSE listed arm holds 40% stake in AVT. At the current market price of Rs. 95 per share, their stake is being valued at Rs. 578.68 crore vis-à-vis the full market capitalisation of NAI at Rs. 236 crore. It has a tiny equity capital of Rs. 62.21 lakh with book value Rs. 3950 per share and 72.45% stake is held by Thomas family. The public shareholders are merely 1240 holding 27.55% stake. Incorporated in 1946, Neelamalai is mainly into tea plantation and its estates are spread in Katary and Sutton. The company's revenue is not that attractive. It clocked total income of Rs. 27 crore on consolidated basis in FY23 with a net profit of Rs. 28 crore wherein share of net profits from associates and joint venture amounted to Rs. 31.54 crore contributed significantly. During the first nine months of FY24, it has reported the total income of Rs. 23.15 crore and PAT of Rs. 31 crore. Again here also, the gain on sale of land and building contributed Rs. 13.46 crore and Rs. 18.22 crore came in towards profit from associates and joint venture.

PERFORMANCE INDICATORS (Rs. in crore)