JM Financial: HT Media, – 2QFY11 net profit better than expected

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HT Media,  – 2QFY11 net profit better than expected
􀂄 Revenues better than expected, EBITDA margin disappoints: At `4.45bn
(up 27% YoY), 2QFY11 consolidated revenues have come in better than JMFe
of `4.03bn, led by 1) better than expected radio revenues at `141mn (up 44%
YoY), 2) higher revenues from HT Burda at `290mn vs `20mn in 1QFY11,
which includes execution of printing catalogue contract from ‘Ikea’ during the
quarter. EBITDA margin at 17.7% (up 310bps YoY) came in c.140bps below
JMFe of 19.2%, primarily due to high newsprint costs and SG&A. At `388mn,
net profit post minority interest component of `32.5mn came in better than
JMFe of `366mn. 2QFY11 EPS stood at `1.7 vs `1.0 in 2QFY10 and `1.8 in
1QFY11 (JMFe `1.6).
􀂄 Other highlights of the quarter: 1) 2QFY11 ad revenues grew c.17% YoY to
`3.3bn with English/Hindi ad revenue growth of 13%/30% YoY to
`2.4bn/`914mn respectively, 2) circulation revenues declined c.13% YoY to
`418mn, led by 26%/5% YoY fall in English/Hindi business to
`130mn/`288mn, 3) Radio business managed to attain positive EBITDA of
`16mn with strong 44% YoY revenue growth to `141mn, 4) 2QFY11 Internet
revenues came in at `27mn vs `10mn in 1QFY11.
􀂄 Maintain HOLD: We would review our TP and earning estimates for HT Media
post its 2QFY11 earnings call (scheduled on 28 Oct’10 at 11AM, dail in: 022-
30650122), wherein we hope to secure management inputs on advertisement
outlook, circulation growth, newsprint prices along with other relevant
details. We maintain our HOLD rating on the stock. At CMP of `163, the stock
is trading at 23x our FY11E EPS of `7.1 and 19x FY12E EPS of `8.5.