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HT Media |
Ad revenues back on track, Radio surprises |
BUY
CMP: Rs 145 Target Price: Rs 175
n Q3FY11 revenues better than our expectation, growing 27.0% (Emkay estimates of 24%) yoy to Rs 4651 million
n Cons. ad-revenues grew by 27% yoy with Hindi ad-revenue growth of 35% yoy and English at 25% yoy
n EBIDTA margins at 19.0% (our estimate of 17.8%) declined by 136 bps yoy while improved 125bps qoq, led by higher revenue realization and significant contribution from Radio segment
n Due to recent correction in stock - Upgrade to BUY rating from HOLD with target price maintained at Rs175
Better than expected results
HT Media reported better than expected results for Q3FY11. Improving yields and partly
higher pricing led to robust print ad growth of 27% yoy. English ad grew 25% yoy and
Hindi grew by 35% yoy. Radio revenues grew whopping 80% yoy to Rs 180 million.
EBITDA margins at 19.0% up 125 bps qoq, however, declined 136 bps yoy due to
higher operating expenditure. Higher EBITDA contribution from radio business and
sequentially flat raw material cost aided the margins. Higher revenue realization coupled
with higher other income and lower interest out go led to 34% yoy growth in APAT.
Hindi business (HMVL) margins under pressure
HMVL also reported numbers couple of days back. Ad revenue growth stood at Rs 944
million, growing 35% yoy. Sequential ad growth of only 3% was due to insignificant
revenue contribution from Bihar state elections. Circulation revenue remained flat yoy at
306 million. However, EBITDA margin stood at 14.0% v/s 14.2% in Q2FY11 due to
higher newsprint prices coupled with higher S&D expenses due to prevailing intense
competitive scenario in Jharkhand market, post the launch of DB Corp in August, 2010.
It has launched Hindi Money in JV with Mint and has launched in 12 top Hindi towns.
Radio business – remarkable growth
On the back of improvement in macro economic environment and improvement in ad
volumes led to a whopping 80% yoy growth in revenues. Driven by higher revenue
realization and savings from lower royalty fee, it reported strong EBITDA margin of
21.4% v/s 0.8% in Q3FY10.
Upgrade to BUY from HOLD, retain target price of Rs175
Given the improvement in macro economic scenario and increasing spends by
corporates, we expect the English ad revenue would post healthy ad revenues going
forward. HT Media has taken also an ad rate hike (10%-15%), effective from 25, Jan
2011. However, due to high newsprint prices coupled with ongoing competitive scenario
in Jharkand market would keep the margin under pressure.
Given the recent correction in the stock, we upgrade the stock to BUY from HOLD with
the target price of Rs175. At CMP of Rs145 stock trades at 20.5x and 14.8x our
estimated EPS of Rs7.1 and Rs9.8 for FY11E and FY12E, respectively.
¾ On the back of ad strong ad revenues, we have revised our revenue estimates upward.
¾ Higher newsprint prices and prevailing competitive scenario in Jharkhand market would
keep the EBITDA margins under pressure.
¾ Lower interest outgo coupled with higher other income to drive the bottom-line
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