Rating: Buy; Target Price: Rs130; CMP: Rs92; Upside: 42%
Better yield, margins forecast
We maintain BUY rating on HT Media as upturn in economy could improve
ad yields. Strong profitability in Hindi business coupled with organic
expansion and turnaround in internet business in FY16 will push up
margins that could augur well for the company in the next 2 years. Low
valuations compared to peers and Rs9bn cash, offer further comfort as
Q4FY14 results were operationally in-line with expectations. The
company posted 10%+ ad growth after 8 quarters while circulation
growth was 14.1% YoY helping operating profit expand by 5.1% YoY to
Rs754mn, marginally impacted by high RM cost.
$ Q4FY14 results operationally in-line with expectations: The company
posted 8.7% YoY growth in sales to Rs5438mn (est of Rs5350mn) on the
back of 10.4% ad growth and 14.1% YoY growth in circulation revenues.
Operating profit was up 5.1% YoY to Rs754mn (est. Rs750mn) with
operating margin compression of 47bps to 13.9%. Ex-Burda, raw material
cost increased by 15% YoY with newsprint prices currently at
Rs39,500/MT. Adj PAT was down 13% YoY to Rs348mn on the back of
reversal of deferred tax assets amounting to Rs190mn during the
quarter.
$ 10%+ ad growth after 8 quarters: The company posted blended ad
growth of 10.4% on the back of 6.4% in English print and healthy 20.3%
in Hindi driven by a mix of yield and volumes. Election led ad benefit
would accrue to the company in Q1FY15. Sectors such as DAVP, Auto,
FMCG and Retail performed well during the quarter. Strong readership
growth in 2013 IRS survey will help the company in yield improvement
over the medium term across Hindi and English businesses. We have
modelled 10% ad growth for FY15 compared to 8.6% FY14.
$ Other businesses continue to grow at a healthy rate: In the radio
business, revenue growth was 24.1% YoY to Rs229mn for the quarter with
EBIT at Rs48mn, up 358% YoY. In FY14, revenue growth was 19% YoY with
operating profit growth at 129% YoY to Rs285mn. In the digital
business, the company posted a revenue of Rs218mn, up 49% YoY with
losses dropping to Rs76mn for the quarter while management continues
to guide for losses at Rs300-350mn for FY15 with revenues at Rs1bn.
Investment will continue in the internet business on brand building
and strengthening the sales force while education business will gain
traction over the next three years.
$ Valuation & risks: We have marginally increased revenue & EBIDTA by
09%/1.9% and 0.1%/0.7% for FY15/FY16 respectively. HT Media continues
to trade at steep discount to peers such as Jagran Prakashan and DB
Corp. We value the company at 12x FY16E and arrive at a target price
of Rs130. Upturn in the economy improving ad yields, strong
profitability in Hindi business coupled with organic expansion, and
turnaround in internet business in FY16 augur well for company over
next 2 years. Key risks being probability of high cost acquisition in
the medium term and high newsprint prices.
Thanks & Regards
��
Better yield, margins forecast
We maintain BUY rating on HT Media as upturn in economy could improve
ad yields. Strong profitability in Hindi business coupled with organic
expansion and turnaround in internet business in FY16 will push up
margins that could augur well for the company in the next 2 years. Low
valuations compared to peers and Rs9bn cash, offer further comfort as
Q4FY14 results were operationally in-line with expectations. The
company posted 10%+ ad growth after 8 quarters while circulation
growth was 14.1% YoY helping operating profit expand by 5.1% YoY to
Rs754mn, marginally impacted by high RM cost.
$ Q4FY14 results operationally in-line with expectations: The company
posted 8.7% YoY growth in sales to Rs5438mn (est of Rs5350mn) on the
back of 10.4% ad growth and 14.1% YoY growth in circulation revenues.
Operating profit was up 5.1% YoY to Rs754mn (est. Rs750mn) with
operating margin compression of 47bps to 13.9%. Ex-Burda, raw material
cost increased by 15% YoY with newsprint prices currently at
Rs39,500/MT. Adj PAT was down 13% YoY to Rs348mn on the back of
reversal of deferred tax assets amounting to Rs190mn during the
quarter.
$ 10%+ ad growth after 8 quarters: The company posted blended ad
growth of 10.4% on the back of 6.4% in English print and healthy 20.3%
in Hindi driven by a mix of yield and volumes. Election led ad benefit
would accrue to the company in Q1FY15. Sectors such as DAVP, Auto,
FMCG and Retail performed well during the quarter. Strong readership
growth in 2013 IRS survey will help the company in yield improvement
over the medium term across Hindi and English businesses. We have
modelled 10% ad growth for FY15 compared to 8.6% FY14.
$ Other businesses continue to grow at a healthy rate: In the radio
business, revenue growth was 24.1% YoY to Rs229mn for the quarter with
EBIT at Rs48mn, up 358% YoY. In FY14, revenue growth was 19% YoY with
operating profit growth at 129% YoY to Rs285mn. In the digital
business, the company posted a revenue of Rs218mn, up 49% YoY with
losses dropping to Rs76mn for the quarter while management continues
to guide for losses at Rs300-350mn for FY15 with revenues at Rs1bn.
Investment will continue in the internet business on brand building
and strengthening the sales force while education business will gain
traction over the next three years.
$ Valuation & risks: We have marginally increased revenue & EBIDTA by
09%/1.9% and 0.1%/0.7% for FY15/FY16 respectively. HT Media continues
to trade at steep discount to peers such as Jagran Prakashan and DB
Corp. We value the company at 12x FY16E and arrive at a target price
of Rs130. Upturn in the economy improving ad yields, strong
profitability in Hindi business coupled with organic expansion, and
turnaround in internet business in FY16 augur well for company over
next 2 years. Key risks being probability of high cost acquisition in
the medium term and high newsprint prices.
Thanks & Regards
No comments:
Post a Comment