Ad revenue declines HT Media ::Centrum Research

Ad revenue declines
HT Media posted subdued Q1FY13 results with a revenue de-growth
of 1.4% led by 3% advertising revenue decline. Other businesses
continued to be in the red which impacted margins. We have lowered
our FY13/FY14 estimates marginally and maintain BUY rating on the
stock.
Decline in ad revenue: HT Media posted results in line with expectations
with topline at Rs4899mn (down 1.4% YoY) following disappointing 3%
decline in advertising revenue in challenging times coupled with 8%
increase in circulation revenues. Operating profit was down 26% YoY
while PAT was down at Rs407mn (20% above our estimates). Advertising
decline was on the back of 6% decline in English daily while Hindi daily
grew by 6% in ad revenues. Key sectors such as auto, BFSI and real estate
impacted the ad growth as national markets declined. Government ads
too declined due to austerity measures.
Hindi business gaining traction: HMVL’s revenue grew by 8% to
Rs1595mn on the back of 6% increase in advertising revenue while
circulation revenue grew by 13%. The publication continues to gain
traction through increasing circulation, rise in cover prices and steady
increase in readership.

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Continued investment in new verticals: In the radio business the
company posted revenue of 186mn (down 13.5% YoY and 5.2% QoQ)
while EBIT profit was at Rs14.5mn against profit of Rs25mn in Q1FY12. In
the internet & digital division the company posted revenue of Rs120mn
(up 41% YoY) with an EBIT loss of Rs117mn against loss of Rs120mn. HT
Burda posted strong results with revenue of Rs240mn.
Margins under pressure: Operating margins declined by 453bps YoY to
Rs13.6% on the back of cost pressure and lower topline. Raw material cost
increased by 3.1% YoY on the back of high circulation coupled with high
newsprint prices. However, on sequential basis the RM cost declined by
2.7% as the company reduced its pagination level and increase in cover
prices impacted circulation which helped in lowering newsprint
consumption during the quarter.
Estimates lowered; Maintain BUY: We have cut our FY13/FY14 estimates
by 7% and 12% on the back of lower ad growth rate impacting margins.
The stock is currently trading at 11x and 9.7x FY13E and FY14E
respectively. We value the company at 14x FY14E with our target price of
Rs130 and maintain BUY rating on the stock.