HT Media - Mixed 2QFY11. :: Kotak Sec,

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HT Media (HTML)
Media
Mixed 2QFY11. HT Media reported mixed 2QFY11 with good standalone financials
(English print and Fever FM radio) negated by weak consolidated financials (Hindi print,
Internet and Burda JV businesses). Standalone 2QFY11 EBITDA at Rs592 mn (+5% qoq;
yoy comparison invalid due to demerger of Hindi print business in 3QFY10) was largely
on account lower employee expenses (-9% qoq). Consolidated 2QFY11 EBITDA at
Rs645 mn resulted from weak Hindi print EBITDA (Rs182 mn; -8% yoy) as well as
EBITDA losses in Internet (on expected lines) and Burda JV (unexpected). We await the
2QFY11 results conference call for clarifications before revising our estimates/rating.



Standalone 2QFY11 financials: Positive but employee expenses require clarification
􀁠 Exhibit 1 presents the standalone 2QFY11 financials of HT Media. HTML reported robust
2QFY11 EBITDA of Rs592 mn (+5% qoq) in a normally weak seasonal quarter led by (1) robust
2% qoq advertising growth and (2) 9% qoq decline in employee expenses despite (3) 12% qoq
growth in newsprint costs.
􀁠 Newsprint costs increased both due to volume increase (higher circulation in Mumbai due to
addition of 40-50K copies and pagination increases given volume growth) as well as newsprint
price inflation, which will be contained going forward as the company has already increased its
newsprint inventory (Rs1.7 bn by end-2QFY11 from Rs0.94 bn by end-FY2010).
􀁠 However, we will seek clarifications on sharp 9% qoq decline in 2QFY11 employee costs. In fact,
1QFY11 employee cost seemed inflated (22% qoq increase in 1QFY11 employee cost) but
management did not highlight any one-offs in the 1QFY11 results conference call. We highlight
from Page 4 of the 1QFY11 concall transcript “Employee cost has two components. First are
the merit-based increases and the second is the increase in manpower for supporting
expansions… No. There is no one-off bonus component in this.”
􀁠 Standalone 2QFY11 other income was up 167% qoq on account of (1) financial gains from exit
of certain ad-for-equity investments, (2) FX-related gains and (3) cash accrual from monies paid
by HMVL (subsidiary) to HTML (parent) for acquisition of Hindustan business. Thus, 2QFY11 PBT
and PAT were higher by 33% and 43% qoq.
􀁠 Fever FM radio business reported 15% qoq increase in revenues (Rs141 mn) and EBITDA of
Rs16 mn during 2QFY11. The financial performance of the radio business will likely be stronger
in 2HFY11E due to festival season and sports calendar (ODI World Cup in 4QFY11E and IPL
Season 4 in 1QFY12E; Fever is the official radio partner for Delhi Daredevils).