HT Media
Buy
Target Price: Rs118
CMP: Rs95
Upside: 24%
Margins under pressure
HT Media posted lower than expected Q2FY13 results with ad revenue de-growth of 1.7%. Margins were subdued on the back of high RM cost and employee salary incentives. Other businesses continued to be in the red impacting margins. We have lowered our FY13/FY14 estimates marginally and maintain BUY rating on the stock.
m Results below expectations: HT Media posted results below expectations with topline at Rs5107mn (up 3.6% YoY) following disappointing 1.7% decline in advertising revenue coupled with 11% increase in circulation revenues. Operating profit was down 20.7% YoY while PAT was down at Rs24mn (22% below our estimates).
m Ad growth continues to remain negative: According to the management, the English segment declined by 6% YoY while Hindi growth was mere 3% YoY. Comparatively for the company, advertising revenue declined by 1.7% YoY to Rs3640mn on the back of 3.3% YoY decline in English publications and 1.7% YoY growth in Hindi dailies. Delhi market declined by 3% YoY while Mumbai posted a growth of 10%. For the Hindi daily, the growth was more in local advertising with Bihar market witnessing growth of 10% and UP 20%+. Sectors such as education continued to de-grow while government, BFSI and consumer goods remained subdued. FMCG and real estate showed marginal growth for the company.
m Hindi business gaining traction: HMVL’s revenue grew by 4% to Rs1592mn on the back of 2% increase in advertising revenue while circulation revenue grew by 16%. The publication division continued to gain traction through increasing circulation, rise in cover prices and steady increase in readership.
m Investment continues in new verticals: In the radio business the company posted revenue of 199mn (up 27% YoY) while EBIT profit was at Rs24mn against Rs14.5mn in Q2FY12 on the back of increase in market share and price hikes. In the internet & digital division the company posted revenue of Rs133mn (up 36% YoY) with an EBIT loss of Rs99mn against loss of Rs117mn. HT Burda posted sluggish results with revenue of Rs210mn and operating loss of Rs20mn. Management maintained that they would continue to invest in the digital and education business and believed that these two businesses would be future growth drivers.
m Margins under pressure: Operating margins declined by 338bps YoY to Rs11.1% on the back of cost pressure and lower topline. Raw material cost increased by 4.7% YoY and 9.6% YoY on the back of high circulation. Management maintained that newsprint prices had declined to $650/tone and the benefits would accrue in coming quarters. Employee cost was up by 22% YoY and 12.8% QoQ on the back of salary hikes and variable pay being given during the quarter. However, according to the management this will not increase more than 7% for FY13. Provision for ad for equity was Rs60mn during the quarter.
m Estimates lowered; Maintain BUY: We have cut our FY13/FY14 estimates by 13% and 9% on the back of lower ad growth rate and higher operating cost. The stock is currently trading at 13.5x and 11.3x FY13E and FY14E respectively. We value the company at 14x FY14E with our target price of Rs118 and maintain BUY rating on the stock.
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