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Downgrade Follows Q3 Performance Miss
The brokerage firm Elara Capital has downgraded DB Corp to an 'Accumulate' rating, simultaneously slashing its price target to ₹280 from ₹300. This move follows a disappointing third quarter where the company's financial performance was significantly impacted by several headwinds.
Advertising Revenue Weakness
DB Corp's print advertising revenue contracted by 6.9% year-on-year during the third quarter. This decline was predominantly driven by the absence of state election-related advertising that had provided a substantial boost in the prior-year period. Government and political advertising plunged 24% year-on-year, its contribution to total revenue falling from 24% in the first nine months of FY25 to 17% in the same period of FY26. The timing of festival advertising also played a role, with a portion of the Navratri period shifting into the second quarter, diverting ad spending away from the third.
Category-Specific Declines
Analysts observed weakness across several key advertising categories. Automobile advertising saw a 12% year-on-year decrease, while jewellery advertising dropped by 7%. Advertising from the Fast-Moving Consumer Goods (FMCG) sector remained soft, and the real estate sector experienced a slowdown following recent price adjustments. Elara Capital highlighted that, excluding election-driven revenues, underlying advertising grew approximately 6% on a like-to-like basis, suggesting some resilience in the core business. The brokerage anticipates that a recently announced 26% government-led price hike for print advertising will begin supporting growth from the fourth quarter of FY26. However, overall FY26 advertising revenue growth is now projected to be flat.
Circulation and Radio Performance
Circulation revenue held steady in Q3, maintaining approximately 4 million copies despite a challenging print environment. DB Corp continues to prioritize volume over yield, keeping cover prices unchanged to protect readership and market position. Government initiatives in Rajasthan and Uttar Pradesh mandating newspaper readership are expected to offer incremental support. Radio revenue experienced a marginal decline of 1.2% year-on-year to ₹486 million. Elara forecasts the circulation and radio segments to achieve compound annual growth rates of 2.0% and 4.2%, respectively, between FY25 and FY28.
Profitability Pressures
Profitability metrics were pressured by operating deleverage, leading to a sharp contraction in the EBITDA margin to 22.3%, down 524 basis points year-on-year. This was attributed to weaker advertising revenues and a slight dip in gross margins. Print margins, however, saw an improvement of 100 basis points to 29%, supported by cost control measures and lower newsprint prices.
Outlook and Valuation
Following the Q3 performance, Elara Capital has revised its revenue and Earnings Per Share (EPS) estimates downwards by 3.3% to 10% for FY25-FY28. While upcoming state elections in key regions might bolster government advertising, the brokerage sees muted near-term growth visibility. DB Corp is currently trading at 9.7 times its FY28 estimated earnings. Elara Capital values the stock at 12 times its December 2027 estimated earnings, underpinning the revised target price.