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Hindustan Media Ventures (HMVL)
Media
Heart of the Hindi heartland. We initiate coverage on HMVL with a BUY rating and
12-month DCF-based target price of Rs225. Hindustan is one of the leading Hindi
newspapers in India with (1) a leadership position in Bihar-Jharkhand (BJH) and Delhi-
NCR markets as well as (2) rising prominence in UP-Uttaranchal (UPU), the largest Hindi
print market in India. HMVL is well positioned to benefit from (1) robust growth in
India’s media industry and print segment and (2) faster advertising growth in
Hindi/regional print media versus mature English press.
12-month DCF-based target price of Rs225 offers 33% potential upside
We value HMVL at Rs225 based on our DCF model, which we believe is the most appropriate
valuation methodology as it captures (1) HMVL’s leading position and rising market share in the
fast-growing regional print markets (notably BJH and UPU) and (2) likely robust growth in free cash
flows led by positive operating leverage. The stock would trade at implied 20X and 11X FY2012E
EPS and EBITDA estimates at our fair valuation.
HMVL/Hindustan: Defend, expand and capture opportunities
HMVL is one of the leading Hindi print media players with (1) a leadership position in BJH and
Delhi-NCR markets as well as (2) rising prominence in lucrative UPU market. HMVL’s continued
growth and progression towards the league of top Hindi print players JAGP and DBCL is
contingent upon (1) defending its strong position and expanding in legacy markets as well as
(2) capturing the available opportunity in new markets.
Financials: Strong earnings momentum led by positive operating leverage
We model robust 20% CAGR in HMVL’s EPS over FY2010-13E led by (1) robust 26% CAGR in
advertising revenues, (2) positive operating leverage in UPU market (~9% EBITDA margin in
FY2013E; EBITDA breakeven in FY2010) adjusted for (3) rising competition in BJH market (~28%
EBITDA margin in FY2013E; ~33% in FY2010). We model FY2012E and FY2013E newsprint prices
at US$650/ton and US$675/ton.
Key risks: Economy, competition, newsprint and execution.
We highlight the following key risks for HMVL—(1) weak advertising revenue market due to a
weak economic growth, (2) increased competitive intensity with the entry of DB Corp in BJH
market, (3) competition for local advertising from emerging media like radio, (4) higher-thanexpected
newsprint prices resulting in negative operating leverage and (5) weaker-than-expected
execution in expansion initiatives (UPU market).
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