Key Takeaway
HT reported results were in line with expectations as higher promotional
spend offset better than expected advertising growth. Advertising growth
saw a recovery both in Hindi and English print. Given the benefits of the
upcoming elections, we expect the growth momentum to sustain driving
margin improvement. Maintain Buy.
Advertising growth sees sharp recovery - HT reported strong recovery in advertising
growth to 10% in the quarter led by Hindi advertising which grew 14%. English advertising
grew by 8%. The growth was led mostly by volume growth. The sectors that contributed
the most to growth were Government, durables, retail and real estate. Circulation revenues
also showed strong growth of 16% led by price hikes in both English and Hindi editions.
Increased promotional activity limit margin gains - Margins in the quarter improved
c80bps, below our expectation of c100bps. This was the company increased its marketing
spend in Hindi and digital business in the quarter. Newsprint costs were below our
expectation due to better control on pagination and circulation. Higher other income led
to PAT ahead of our expectations.
Conf call highlights - Management indicated that newsprint prices increased c2-3% in
the quarter and they expect a full year increase of c5-7%. The company expects to start
its mid-career education initiative "Bridge School of Management" in the next couple of
months. The total investment in the education business is expected to be around Rs 150mn
over next two years.
Margins to improve but cash usage the key overhang - With the recovery in
advertising growth we expect margins for the company to improve. We expect margin
improvement of c390bps over FY13-15E led by advertising growth of 12% and newsprint
price increases of 5-6% annually. The key concern though remains usage of the Rs6.8bn
cash balance with the company.
Valuation/Risks
We adjust our estimates for better advertising growth and higher newsprint prices. Our
FY14-15 EPS rise by c2%. The stock is trading at 10.2x FY14 PE. Given the 28% EPS CAGR over
FY13-15, we believe the stock offers value at current levels. We retain our Buy rating and PT
of Rs 130. We though remain cautious of the company's large cash balance and expansion
plans into new businesses. Risks: 1) newsprint prices, 2) competition, and 3) investment in
new business
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HT reported results were in line with expectations as higher promotional
spend offset better than expected advertising growth. Advertising growth
saw a recovery both in Hindi and English print. Given the benefits of the
upcoming elections, we expect the growth momentum to sustain driving
margin improvement. Maintain Buy.
Advertising growth sees sharp recovery - HT reported strong recovery in advertising
growth to 10% in the quarter led by Hindi advertising which grew 14%. English advertising
grew by 8%. The growth was led mostly by volume growth. The sectors that contributed
the most to growth were Government, durables, retail and real estate. Circulation revenues
also showed strong growth of 16% led by price hikes in both English and Hindi editions.
Increased promotional activity limit margin gains - Margins in the quarter improved
c80bps, below our expectation of c100bps. This was the company increased its marketing
spend in Hindi and digital business in the quarter. Newsprint costs were below our
expectation due to better control on pagination and circulation. Higher other income led
to PAT ahead of our expectations.
Conf call highlights - Management indicated that newsprint prices increased c2-3% in
the quarter and they expect a full year increase of c5-7%. The company expects to start
its mid-career education initiative "Bridge School of Management" in the next couple of
months. The total investment in the education business is expected to be around Rs 150mn
over next two years.
Margins to improve but cash usage the key overhang - With the recovery in
advertising growth we expect margins for the company to improve. We expect margin
improvement of c390bps over FY13-15E led by advertising growth of 12% and newsprint
price increases of 5-6% annually. The key concern though remains usage of the Rs6.8bn
cash balance with the company.
Valuation/Risks
We adjust our estimates for better advertising growth and higher newsprint prices. Our
FY14-15 EPS rise by c2%. The stock is trading at 10.2x FY14 PE. Given the 28% EPS CAGR over
FY13-15, we believe the stock offers value at current levels. We retain our Buy rating and PT
of Rs 130. We though remain cautious of the company's large cash balance and expansion
plans into new businesses. Risks: 1) newsprint prices, 2) competition, and 3) investment in
new business
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