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HT MEDIA
PRICE: RS.166 RECOMMENDATION: BUY
TARGET PRICE: RS.220 FY12E P/E: 15.7X
HT Media's 1QFY12 results reinforce our investment thesis on the stock.
With 23% growth in revenues (+ 5.6% above our estimates), and 13%
growth in EBITDA (+2.5% above our estimates), HT Media has been able to
show strong growth in the backdrop of a challenging macroeconomic
environment, and adverse raw material scenario. We believe the same is a
result of strong readership gains made by the company over the past few
quarters, and see HT Media well - positioned to outperform print media
peers in the coming quarters. While the movement towards our assessed
fair value (Rs.220) may be slow (on account of uncertainty in advertising
environment, raw material prices), we remain convinced that HT Media shall
provide strong returns over the medium term. We maintain BUY on HT
Media, with a (FY12-end) price target of Rs.220.
n HT Media's reported 1QFY12 financials are well ahead of our estimates. The
company reported revenues Rs 4970 mn and EBITDA Rs 903 mn. Advertising
revenue growth for the company has been strong (17%), more so in the English
segment (18%). Strong growth in the English segment is a positive, and shows
that readership gains made by the company are yielding results (as per management,
growth in Mumbai was between 30-40% for the quarter).
n Improvement in advertising yields is an indicator that our fundamental thesis on
HT Media is playing out: HT Media has invested behind a significant set of newspapers/
editions over the past 5 -6 years, and these properties have now reached
a threshold level of readership that portend strong, industry-beating growth, led
by yield convergence with market leaders (on a cost per reader basis).
n While macroeconomic outlook suggests weakening demand from categories
such as real estate and BFSI, we see reason to believe that HT Media shall continue
to outperform peers on advertising revenue growth, at the back of improving
yields (which themselves are dependent on readership). Opportunity size for
HT Media properties remains large, with significant scope for catch-up in
Mumbai, the business newspapers' space, and Uttar Pradesh. Longer-term, structural
drivers of advertising expenditures in India remain intact.
n We continue to see HT Media as a company with multiple growth opportunities,
and the company has made significant headways in many markets at once -
which bode well for long-term returns from the stock. We value HT Media at
Rs.220/ share, and maintain BUY.
n Risks to our view include : 1/ significant weakening in advertising expenditures
going forward: Shorter-term (likely 2QFY12), management comments suggested
that adex growth may be soft, impacting the industry as a whole, 2/
further strengthening in newsprint prices: HT Media has paid Rs 32,200/ tonne in
1QFY12, in line with our projections for the year, 3/ competitive risks: we believe
competitive risks shall be contained to the extent that risks 1/ and 2/ listed above
play out.
n Strong Growth in Revenues: HT Media reported 23% growth in operating revenues,
aided by: 1/ 17% growth in advertising revenue (publications), 2/75% in
radio revenues, 3/ Rs 250 mn revenues from publishing JV HT Burda.
n Advertising Revenue Growth Strong in English businesses, readership
gains flowing down to yield improvment: HT Media's English businesses
(HT, Mint) grew 18%, faster than 15% growth in the Hindi Business (Hindustan
Media Ventures). This is the second consecutive quarter when growth in English
businesses has been faster than Hindi business. As per management, Hindi business
has been weak due to lower advertising from education and government in
the quarter.
n Ad-Rate Hikes being passed on, reflects positively for the readership-advertising
yields connect: Advertising growth in both the English as well as
Hindi business has been primarily driven by higher yields, as per management.
We believe this is a data point that supports our belief that readership growth
shall ultimately lead to strong growth in yields and revenues for HT Media's
newspapers.
n Other Revenue streams perform strongly: The company reported 3% growth
in circulation revenues, on the back of higher circulation. Radio business saw
growth of 75% y/y, and HT - Burda booked revenues of ~Rs 250mn.
n Strong growth in revenues offsets high growth in expenses, EBITDA
grew 13%: Strong growth in revenues offset expected growth in newsprint
prices, as well as strong growth in other expenses of the company , leading to
13% EBITDA growth, 2.5% ahead of our estimates.
n Economy Adex Moderating: The management said that the industry was seeing
and is likely to see a protracted period of soft growth in certain key categories
such as real estate, and financials. The slowdown is a result of tightening interest
rates, and may extend to a few quarters.
n Status on New Ventures: 1/ HT Media has made a small foray in the education
sector, in a JV with Mahesh Tutorial through subsidiary "HT Learning". Initial
investments on the JV (first year) are likely to be in the region of Rs 80mn. The
JV will focus on supplemental learning. 2/ Management indicated that the
internet subsidiary of the company may seek strategic investors, 3/ The company
is still in the process of formulating a strategy for its radio operations, with regard
to Phase -3 of radio licensing. While the management defended their choice of
being present only in metro cities, the company is not committed to following
the same in Phase -3.
n Expectation on Newsprint Expenses: From management comments, we infer
that newsprint prices are expected to be stable for the company in the coming
year (at this quarter's levels of ~Rs 32,200/Tonne). Circulation of the company's
newspapers is likely to rise 3-4%, with growth more pronounced in HTMumbai/
Mint/ Hindustan(UP).
Our Take
n 1QFY12 is a confirmation for our view on HT Media: 1/ Over the medium/ longterm,
HT Media shall see strong growth in advertising revenues, on the back of
gains in readership, which will enable growth above industry growth - rates, 2/
Revenue growth shall offset growth in expenses (especially newsprint) enabling
strong growth in profitability in FY12/ FY13.
n HT Media continues to be among our preferred picks in the media space. We
believe that the readership gains made by the company shall lead to strong
growth in advertising revenues, and bring new editions to profitability in the coming
quarters.
n We continue to expect FY12E/ FY13E EPS of Rs 10.6/ Rs 13.9. Given the persisting
uncertainty on newsprint costs, as well as weakening advertising environment,
we believe the convergence of price to value shall follow earnings. We
maintain our price target of Rs.220. BUY.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
HT MEDIA
PRICE: RS.166 RECOMMENDATION: BUY
TARGET PRICE: RS.220 FY12E P/E: 15.7X
HT Media's 1QFY12 results reinforce our investment thesis on the stock.
With 23% growth in revenues (+ 5.6% above our estimates), and 13%
growth in EBITDA (+2.5% above our estimates), HT Media has been able to
show strong growth in the backdrop of a challenging macroeconomic
environment, and adverse raw material scenario. We believe the same is a
result of strong readership gains made by the company over the past few
quarters, and see HT Media well - positioned to outperform print media
peers in the coming quarters. While the movement towards our assessed
fair value (Rs.220) may be slow (on account of uncertainty in advertising
environment, raw material prices), we remain convinced that HT Media shall
provide strong returns over the medium term. We maintain BUY on HT
Media, with a (FY12-end) price target of Rs.220.
n HT Media's reported 1QFY12 financials are well ahead of our estimates. The
company reported revenues Rs 4970 mn and EBITDA Rs 903 mn. Advertising
revenue growth for the company has been strong (17%), more so in the English
segment (18%). Strong growth in the English segment is a positive, and shows
that readership gains made by the company are yielding results (as per management,
growth in Mumbai was between 30-40% for the quarter).
n Improvement in advertising yields is an indicator that our fundamental thesis on
HT Media is playing out: HT Media has invested behind a significant set of newspapers/
editions over the past 5 -6 years, and these properties have now reached
a threshold level of readership that portend strong, industry-beating growth, led
by yield convergence with market leaders (on a cost per reader basis).
n While macroeconomic outlook suggests weakening demand from categories
such as real estate and BFSI, we see reason to believe that HT Media shall continue
to outperform peers on advertising revenue growth, at the back of improving
yields (which themselves are dependent on readership). Opportunity size for
HT Media properties remains large, with significant scope for catch-up in
Mumbai, the business newspapers' space, and Uttar Pradesh. Longer-term, structural
drivers of advertising expenditures in India remain intact.
n We continue to see HT Media as a company with multiple growth opportunities,
and the company has made significant headways in many markets at once -
which bode well for long-term returns from the stock. We value HT Media at
Rs.220/ share, and maintain BUY.
n Risks to our view include : 1/ significant weakening in advertising expenditures
going forward: Shorter-term (likely 2QFY12), management comments suggested
that adex growth may be soft, impacting the industry as a whole, 2/
further strengthening in newsprint prices: HT Media has paid Rs 32,200/ tonne in
1QFY12, in line with our projections for the year, 3/ competitive risks: we believe
competitive risks shall be contained to the extent that risks 1/ and 2/ listed above
play out.
n Strong Growth in Revenues: HT Media reported 23% growth in operating revenues,
aided by: 1/ 17% growth in advertising revenue (publications), 2/75% in
radio revenues, 3/ Rs 250 mn revenues from publishing JV HT Burda.
n Advertising Revenue Growth Strong in English businesses, readership
gains flowing down to yield improvment: HT Media's English businesses
(HT, Mint) grew 18%, faster than 15% growth in the Hindi Business (Hindustan
Media Ventures). This is the second consecutive quarter when growth in English
businesses has been faster than Hindi business. As per management, Hindi business
has been weak due to lower advertising from education and government in
the quarter.
n Ad-Rate Hikes being passed on, reflects positively for the readership-advertising
yields connect: Advertising growth in both the English as well as
Hindi business has been primarily driven by higher yields, as per management.
We believe this is a data point that supports our belief that readership growth
shall ultimately lead to strong growth in yields and revenues for HT Media's
newspapers.
n Other Revenue streams perform strongly: The company reported 3% growth
in circulation revenues, on the back of higher circulation. Radio business saw
growth of 75% y/y, and HT - Burda booked revenues of ~Rs 250mn.
n Strong growth in revenues offsets high growth in expenses, EBITDA
grew 13%: Strong growth in revenues offset expected growth in newsprint
prices, as well as strong growth in other expenses of the company , leading to
13% EBITDA growth, 2.5% ahead of our estimates.
n Economy Adex Moderating: The management said that the industry was seeing
and is likely to see a protracted period of soft growth in certain key categories
such as real estate, and financials. The slowdown is a result of tightening interest
rates, and may extend to a few quarters.
n Status on New Ventures: 1/ HT Media has made a small foray in the education
sector, in a JV with Mahesh Tutorial through subsidiary "HT Learning". Initial
investments on the JV (first year) are likely to be in the region of Rs 80mn. The
JV will focus on supplemental learning. 2/ Management indicated that the
internet subsidiary of the company may seek strategic investors, 3/ The company
is still in the process of formulating a strategy for its radio operations, with regard
to Phase -3 of radio licensing. While the management defended their choice of
being present only in metro cities, the company is not committed to following
the same in Phase -3.
n Expectation on Newsprint Expenses: From management comments, we infer
that newsprint prices are expected to be stable for the company in the coming
year (at this quarter's levels of ~Rs 32,200/Tonne). Circulation of the company's
newspapers is likely to rise 3-4%, with growth more pronounced in HTMumbai/
Mint/ Hindustan(UP).
Our Take
n 1QFY12 is a confirmation for our view on HT Media: 1/ Over the medium/ longterm,
HT Media shall see strong growth in advertising revenues, on the back of
gains in readership, which will enable growth above industry growth - rates, 2/
Revenue growth shall offset growth in expenses (especially newsprint) enabling
strong growth in profitability in FY12/ FY13.
n HT Media continues to be among our preferred picks in the media space. We
believe that the readership gains made by the company shall lead to strong
growth in advertising revenues, and bring new editions to profitability in the coming
quarters.
n We continue to expect FY12E/ FY13E EPS of Rs 10.6/ Rs 13.9. Given the persisting
uncertainty on newsprint costs, as well as weakening advertising environment,
we believe the convergence of price to value shall follow earnings. We
maintain our price target of Rs.220. BUY.
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