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Hindustan Media Ventures (HMVL)
Media
Strong 2QFY12 in challenging environment. HMVL reported strong 2QFY12 EBITDA
of Rs314 mn (+73% yoy) led by (1) strong 23% yoy advertising growth in challenging
environment, (2) improved margins (+7 ppts yoy) but also (3) favorable base (impact of
cover price cut in Jharkhand from 2QFY11). Retain BUY with unchanged FY2013E TP of
Rs220 (EPS adjusted for growth, cost control and Rs/US$ assumptions) led by
(1) leadership position in Bihar (structural advertising growth), (2) tail stage of UP
expansion and (3) attractive valuations at 11X FY2013E EPS estimates. We expect the
~70% EV/reader discount versus peers to reduce over the next few quarters.
Strong 2QFY12: advertising growth momentum recovers in challenging environment
HMVL reported strong 2QFY12 EBITDA of Rs314 mn (+73%) led by (1) strong advertising
growth (+23%) in challenging environment as well as (2) relatively stable cost structure
resulting in improved margin performance (+7 ppts yoy). HMVL also had a favorable base
(Exhibits 2-3) given impact of cover price cuts in Jharkhand from 2QFY11.
We highlight that HMVL’s 2QFY12 financials below the EBITDA line are not comparable to prior
quarters given equity raising/IPO of the company in 3QFY11.
HMVL reported strong 2QFY12 advertising revenues of Rs1.13 bn (+23%) after 2 quarters of
sub-20% growth (fanning fears of slowdown in growth momentum). The strong growth was
led by (1) structural advertising shift in Bihar (due to economic turnaround) and (2) continued
incremental contribution flowing through from the UP expansion.
Retain BUY: likely reduction in ~65% EV/reader discount versus peers sooner than later
The rebound in advertising growth renews the confidence that weak performance of the past few
quarters was largely on account of one-off impediments; (1) the structural growth drivers remain
intact (Bihar, UP) and (2) so does the focus of the company on improving monetization (bridging
the large gap versus leading peers JAGP/DBCL). However, HMVL needs to (1) ensure continued
robust market share in Bihar (emerging competition) and (2) complete the UP expansion (the top
cities at least, and start targeting the runners-up position) to drive advertising benefits in FY2013E
(advertising recovery). The next few quarters provide the opportunity: (1) reduced competition
(weak advertising environment), (2) reduced newsprint pressures and (3) margin tailwinds
(favorable base, much below peer margins). The company plans to launch 2 editions in UP (Aligarh,
Moradabad) and strengthen Bihar (Gaya) in 2HFY12E.
Retain BUY with unchanged FY2013E TP of Rs220. Our revised FY2012E-13E EPS estimates are
Rs10 (Rs9 previously) and Rs12 (unchanged) adjusted for advertising growth, cost control and
revised Rs/US$ assumptions. HMVL remains attractively valued at 11X FY2013E EPS but more
important, ~70% EV/reader discount versus peers. We expect the discount to close led by
continued operational and improved financial performance.
HMVL reported 2QFY12 operating costs of Rs1.23 bn (+14% yoy) versus 23% yoy
growth in revenues, resulting in positive operating leverage (+7 ppts yoy increase in
EBITDA margin, which reached 20%+ levels in 2QFY12). HMVL highlighted cost
optimization measures, notably newsprint consumption (pagination levels, circulation
wastage) as well as improved employee productivity.
The EBITDA margin was also supported by lack of new launches in this particular quarter;
HMVL plans to renew its expansion and consolidation in core UP and Bihar markets in
2HFY12E, which is timely in our view. The completion of UP expansion in 2HFY12E will
provide HMVL with the option of rate hikes in FY2013E as well.
HMVL has already taken provisions of Rs35 mn against its ad-for-equity investments in
GTL Infrastructure; no further provisions are envisaged.
HMVL continues to maintain a strong balance sheet (net cash of Rs1.87 bn) after IPO,
resulting in interest income of Rs35 mn in 2QFY12. Tax rates were optically lower at 26%
given interest income from FMPs is exempt from tax.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Hindustan Media Ventures (HMVL)
Media
Strong 2QFY12 in challenging environment. HMVL reported strong 2QFY12 EBITDA
of Rs314 mn (+73% yoy) led by (1) strong 23% yoy advertising growth in challenging
environment, (2) improved margins (+7 ppts yoy) but also (3) favorable base (impact of
cover price cut in Jharkhand from 2QFY11). Retain BUY with unchanged FY2013E TP of
Rs220 (EPS adjusted for growth, cost control and Rs/US$ assumptions) led by
(1) leadership position in Bihar (structural advertising growth), (2) tail stage of UP
expansion and (3) attractive valuations at 11X FY2013E EPS estimates. We expect the
~70% EV/reader discount versus peers to reduce over the next few quarters.
Strong 2QFY12: advertising growth momentum recovers in challenging environment
HMVL reported strong 2QFY12 EBITDA of Rs314 mn (+73%) led by (1) strong advertising
growth (+23%) in challenging environment as well as (2) relatively stable cost structure
resulting in improved margin performance (+7 ppts yoy). HMVL also had a favorable base
(Exhibits 2-3) given impact of cover price cuts in Jharkhand from 2QFY11.
We highlight that HMVL’s 2QFY12 financials below the EBITDA line are not comparable to prior
quarters given equity raising/IPO of the company in 3QFY11.
HMVL reported strong 2QFY12 advertising revenues of Rs1.13 bn (+23%) after 2 quarters of
sub-20% growth (fanning fears of slowdown in growth momentum). The strong growth was
led by (1) structural advertising shift in Bihar (due to economic turnaround) and (2) continued
incremental contribution flowing through from the UP expansion.
Retain BUY: likely reduction in ~65% EV/reader discount versus peers sooner than later
The rebound in advertising growth renews the confidence that weak performance of the past few
quarters was largely on account of one-off impediments; (1) the structural growth drivers remain
intact (Bihar, UP) and (2) so does the focus of the company on improving monetization (bridging
the large gap versus leading peers JAGP/DBCL). However, HMVL needs to (1) ensure continued
robust market share in Bihar (emerging competition) and (2) complete the UP expansion (the top
cities at least, and start targeting the runners-up position) to drive advertising benefits in FY2013E
(advertising recovery). The next few quarters provide the opportunity: (1) reduced competition
(weak advertising environment), (2) reduced newsprint pressures and (3) margin tailwinds
(favorable base, much below peer margins). The company plans to launch 2 editions in UP (Aligarh,
Moradabad) and strengthen Bihar (Gaya) in 2HFY12E.
Retain BUY with unchanged FY2013E TP of Rs220. Our revised FY2012E-13E EPS estimates are
Rs10 (Rs9 previously) and Rs12 (unchanged) adjusted for advertising growth, cost control and
revised Rs/US$ assumptions. HMVL remains attractively valued at 11X FY2013E EPS but more
important, ~70% EV/reader discount versus peers. We expect the discount to close led by
continued operational and improved financial performance.
HMVL reported 2QFY12 operating costs of Rs1.23 bn (+14% yoy) versus 23% yoy
growth in revenues, resulting in positive operating leverage (+7 ppts yoy increase in
EBITDA margin, which reached 20%+ levels in 2QFY12). HMVL highlighted cost
optimization measures, notably newsprint consumption (pagination levels, circulation
wastage) as well as improved employee productivity.
The EBITDA margin was also supported by lack of new launches in this particular quarter;
HMVL plans to renew its expansion and consolidation in core UP and Bihar markets in
2HFY12E, which is timely in our view. The completion of UP expansion in 2HFY12E will
provide HMVL with the option of rate hikes in FY2013E as well.
HMVL has already taken provisions of Rs35 mn against its ad-for-equity investments in
GTL Infrastructure; no further provisions are envisaged.
HMVL continues to maintain a strong balance sheet (net cash of Rs1.87 bn) after IPO,
resulting in interest income of Rs35 mn in 2QFY12. Tax rates were optically lower at 26%
given interest income from FMPs is exempt from tax.
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