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HT Media (HTML)
Media
Cyclically weak 2QFY12. HTML reported apparently weak 2QFY12 EBITDA of Rs671
mn (+4% yoy). However, adjusted EBITDA of Rs789 mn (+22% yoy) was in line with
expectations, adjusted for (1) Rs63 mn forex losses and (2) Rs55 mn of ad-for-equity
provisions. HT Delhi ad growth slowed to ~4% yoy, reflecting the cyclical impact on
English dailies (slowdown in real estate ads in Delhi-Mumbai); the impact of currency
fluctuations is yet to be felt on newsprint costs though cost rationalization is possible.
Structural drivers (Hindustan, HT Mint and HT Mumbai) sustain but Fever FM surprised
negatively in 2QFY12. Retain ADD with FV of Rs170 (Rs190 previously) and await end
of cyclical downturn or better valuations (~15X FY2013E EPS estimates).
2QFY12 results: In line adjusted for one-offs but too many moving parts here
HTML reported apparently weak 2QFY12 standalone EBITDA of Rs484 mn (-19% yoy). HTML
reported (1) Rs63 mn of forex losses (buyers credit) and (2) Rs55 mn of ad-for-equity provision),
resulting in adjusted EBITDA of Rs602 mn (+1% yoy). Fever FM radio financials surprised
negatively with Rs45 mn operating (EBIT) loss.
HTML reported apparently weak 2QFY12 consolidated EBITDA of Rs671 mn (+4% yoy).
Adjusted EBITDA of Rs789 mn (+22% yoy; above-mentioned adjustments) was led largely by
strong performance of the Hindi Hindustan business. HT-Burda reported EBITDA profits but lack
of any improvement in Internet financials is a concern. HTML has many moving parts in
emerging state, which will take time to scale up meaningfully.
Cyclically weak given no financial strength beyond HT Delhi (Hindustan emerging)
HTML’s multiple business lines has limited diversification benefit currently with HT Delhi’s >50%
contribution in EBITDA. HT Delhi being mature brand in mature market is susceptible to cyclical
interest-rate sensitive downturn, notably real estate and BFSI (Exhibits 3-4). HTML reported ~58%
share of imported newsprint (by value) in FY2011; sharp currency fluctuations at end-2QFY12 will
likely reflect in newsprint costs in 2HFY12E. Thus, we revise our FY2012E-13E EPS to Rs7.4 (Rs8.9
previously) and Rs9.6 (Rs11) with FY2013E fair value of Rs170 (Rs190). HTML can correct its
newsprint consumption somewhat given weak advertising volumes.
Structurally strong led by Hindustan, HT Mumbai and HT Mint but scale-up to take time
HT’s operational performance continues to remain strong as evidenced by (1) leadership position in
core Delhi English print market and (2) strong readership growth across emerging brands (Hindi
Hindustan, HT Mumbai and HT Mint). However, only Hindi Hindustan contributes meaningfully to
EBITDA currently and will take time to achieve HT Delhi’s scale. HT Mumbai has high cost of
growth due to low cover price (competition from DNA). HTML continues to report a strong
balance sheet with net cash of Rs3.8 bn (dividend much below peers). Retain ADD and await end
of cyclical downturn or better valuation (~15X FY2013E EPS estimates).
2QFY12 standalone financials (contd.)
HTML reported standalone English print advertising revenue of Rs2.6 bn (+8% yoy) led by
continued strong growth in HT Mint (~30% yoy) and HT Mumbai (~16% yoy) due to
robust market share gains as well as change in the position of these brands (runners-up)
across their respective markets. Flagship HT Delhi ad growth softened to ~4% yoy,
reflecting the cyclical downturn as well as dependence on highly interest-rate sensitive
sectors such as real estate and BFSI (IPOs et al).
English print circulation revenues increased 34% yoy largely led by HT Delhi (stable twoplayer
market along with ToI-BCCL). HT Mumbai still remains a fiercely competitive
market led by DNA, which continues to target the runners-up position in its only large
market. HT continues to invest and defend/consolidate its position, rightly so in our view,
but with the associated lack of financial flexibility.
RM costs increased 17% yoy and 5% qoq partly on account of pricing (~2% qoq) but
also due to increased circulation investments across its brands, notably HT Mumbai.
However, the current newsprint cost does not capture the impact of currency fluctuations,
which is going to be significant for HT given their consumption of imported newsprint
and likely to impact going forward. However, HT is also likely to adjust cost elements
(pagination et al) given weak advertising environment.
Employee expenses declined 5% qoq due to bonus provisions in 1QFY12. Overhead
expenses increased 18% yoy largely due to one-offs detailed previously.
The negative surprise during 2QFY12 really came from Fever FM radio business, which
reported operating loss of Rs45 mn versus Rs6 mn of operating profit in 2QFY11. HTML
noted mismatch between marketing expenses and slowdown in ad revenue (+11% yoy),
which will be reversed from 3QFY12E. Consequently, English print EBITDA still witnessed
modest yoy growth, adjusting for forex losses.
2QFY12 consolidated financials (contd.)
HTML reported consolidated 2QFY12 adjusted EBITDA of Rs789 mn (~22% yoy), much
ahead of ~1% yoy growth in standalone adjusted EBITDA. The positive variance largely
resulted from surprisingly strong performance of Hindustan Media, which reported
EBITDA of Rs314 mn (+73% yoy); we have discussed the HMVL financials in our
note ’Strong 2QFY12 in a challenging environment’ dated October 20, 2011.
Consolidated 2QFY12 advertising revenue growth of 12% yoy was also stronger-thanstandalone
due to Hindi Hindustan performance, which reported 24% yoy growth in
advertising revenues (at inflection point, in our view). Hindi Hindustan will likely be one
key driver for HT Media in the next few quarters.
HT-Burda reported EBITDA of Rs5 mn on revenues of Rs315 mn (+7% yoy). However, the
largest delta in HT-Burda was realized due to cost savings (2QFY11 revenues of Rs285 mn
and EBITDA loss of Rs33 mn) due to switchover domestic paper.
Interest segment continues to bleed with Rs106 mn of operating losses on revenues of
Rs100 mn (+56% yoy). HT Media considers internet to be a strategic investment and thus,
would invest in newer properties (HT Campus recently) as prior investments come off the
investment curve. We have not been in agreement with the company’s internet strategy
and do not assume any value-accretion or vice-versa for now.
HTML reported 2QFY12 other income of Rs246 mn (+23% yoy), including Rs60 mn of
one-time income due to sale of 50% stake in Metro Now JV to partner ToI-BCCL. HTML
reported one-time income of ~Rs100 mn in 2QFY11 due to profits from ad-for-equity.
Thus, adjusted other income has grown led by robust net cash position
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
HT Media (HTML)
Media
Cyclically weak 2QFY12. HTML reported apparently weak 2QFY12 EBITDA of Rs671
mn (+4% yoy). However, adjusted EBITDA of Rs789 mn (+22% yoy) was in line with
expectations, adjusted for (1) Rs63 mn forex losses and (2) Rs55 mn of ad-for-equity
provisions. HT Delhi ad growth slowed to ~4% yoy, reflecting the cyclical impact on
English dailies (slowdown in real estate ads in Delhi-Mumbai); the impact of currency
fluctuations is yet to be felt on newsprint costs though cost rationalization is possible.
Structural drivers (Hindustan, HT Mint and HT Mumbai) sustain but Fever FM surprised
negatively in 2QFY12. Retain ADD with FV of Rs170 (Rs190 previously) and await end
of cyclical downturn or better valuations (~15X FY2013E EPS estimates).
2QFY12 results: In line adjusted for one-offs but too many moving parts here
HTML reported apparently weak 2QFY12 standalone EBITDA of Rs484 mn (-19% yoy). HTML
reported (1) Rs63 mn of forex losses (buyers credit) and (2) Rs55 mn of ad-for-equity provision),
resulting in adjusted EBITDA of Rs602 mn (+1% yoy). Fever FM radio financials surprised
negatively with Rs45 mn operating (EBIT) loss.
HTML reported apparently weak 2QFY12 consolidated EBITDA of Rs671 mn (+4% yoy).
Adjusted EBITDA of Rs789 mn (+22% yoy; above-mentioned adjustments) was led largely by
strong performance of the Hindi Hindustan business. HT-Burda reported EBITDA profits but lack
of any improvement in Internet financials is a concern. HTML has many moving parts in
emerging state, which will take time to scale up meaningfully.
Cyclically weak given no financial strength beyond HT Delhi (Hindustan emerging)
HTML’s multiple business lines has limited diversification benefit currently with HT Delhi’s >50%
contribution in EBITDA. HT Delhi being mature brand in mature market is susceptible to cyclical
interest-rate sensitive downturn, notably real estate and BFSI (Exhibits 3-4). HTML reported ~58%
share of imported newsprint (by value) in FY2011; sharp currency fluctuations at end-2QFY12 will
likely reflect in newsprint costs in 2HFY12E. Thus, we revise our FY2012E-13E EPS to Rs7.4 (Rs8.9
previously) and Rs9.6 (Rs11) with FY2013E fair value of Rs170 (Rs190). HTML can correct its
newsprint consumption somewhat given weak advertising volumes.
Structurally strong led by Hindustan, HT Mumbai and HT Mint but scale-up to take time
HT’s operational performance continues to remain strong as evidenced by (1) leadership position in
core Delhi English print market and (2) strong readership growth across emerging brands (Hindi
Hindustan, HT Mumbai and HT Mint). However, only Hindi Hindustan contributes meaningfully to
EBITDA currently and will take time to achieve HT Delhi’s scale. HT Mumbai has high cost of
growth due to low cover price (competition from DNA). HTML continues to report a strong
balance sheet with net cash of Rs3.8 bn (dividend much below peers). Retain ADD and await end
of cyclical downturn or better valuation (~15X FY2013E EPS estimates).
2QFY12 standalone financials (contd.)
HTML reported standalone English print advertising revenue of Rs2.6 bn (+8% yoy) led by
continued strong growth in HT Mint (~30% yoy) and HT Mumbai (~16% yoy) due to
robust market share gains as well as change in the position of these brands (runners-up)
across their respective markets. Flagship HT Delhi ad growth softened to ~4% yoy,
reflecting the cyclical downturn as well as dependence on highly interest-rate sensitive
sectors such as real estate and BFSI (IPOs et al).
English print circulation revenues increased 34% yoy largely led by HT Delhi (stable twoplayer
market along with ToI-BCCL). HT Mumbai still remains a fiercely competitive
market led by DNA, which continues to target the runners-up position in its only large
market. HT continues to invest and defend/consolidate its position, rightly so in our view,
but with the associated lack of financial flexibility.
RM costs increased 17% yoy and 5% qoq partly on account of pricing (~2% qoq) but
also due to increased circulation investments across its brands, notably HT Mumbai.
However, the current newsprint cost does not capture the impact of currency fluctuations,
which is going to be significant for HT given their consumption of imported newsprint
and likely to impact going forward. However, HT is also likely to adjust cost elements
(pagination et al) given weak advertising environment.
Employee expenses declined 5% qoq due to bonus provisions in 1QFY12. Overhead
expenses increased 18% yoy largely due to one-offs detailed previously.
The negative surprise during 2QFY12 really came from Fever FM radio business, which
reported operating loss of Rs45 mn versus Rs6 mn of operating profit in 2QFY11. HTML
noted mismatch between marketing expenses and slowdown in ad revenue (+11% yoy),
which will be reversed from 3QFY12E. Consequently, English print EBITDA still witnessed
modest yoy growth, adjusting for forex losses.
2QFY12 consolidated financials (contd.)
HTML reported consolidated 2QFY12 adjusted EBITDA of Rs789 mn (~22% yoy), much
ahead of ~1% yoy growth in standalone adjusted EBITDA. The positive variance largely
resulted from surprisingly strong performance of Hindustan Media, which reported
EBITDA of Rs314 mn (+73% yoy); we have discussed the HMVL financials in our
note ’Strong 2QFY12 in a challenging environment’ dated October 20, 2011.
Consolidated 2QFY12 advertising revenue growth of 12% yoy was also stronger-thanstandalone
due to Hindi Hindustan performance, which reported 24% yoy growth in
advertising revenues (at inflection point, in our view). Hindi Hindustan will likely be one
key driver for HT Media in the next few quarters.
HT-Burda reported EBITDA of Rs5 mn on revenues of Rs315 mn (+7% yoy). However, the
largest delta in HT-Burda was realized due to cost savings (2QFY11 revenues of Rs285 mn
and EBITDA loss of Rs33 mn) due to switchover domestic paper.
Interest segment continues to bleed with Rs106 mn of operating losses on revenues of
Rs100 mn (+56% yoy). HT Media considers internet to be a strategic investment and thus,
would invest in newer properties (HT Campus recently) as prior investments come off the
investment curve. We have not been in agreement with the company’s internet strategy
and do not assume any value-accretion or vice-versa for now.
HTML reported 2QFY12 other income of Rs246 mn (+23% yoy), including Rs60 mn of
one-time income due to sale of 50% stake in Metro Now JV to partner ToI-BCCL. HTML
reported one-time income of ~Rs100 mn in 2QFY11 due to profits from ad-for-equity.
Thus, adjusted other income has grown led by robust net cash position
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