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Ad revenue growth remains robust, but some caution ahead. Q1FY12 ad
revenues were up 17% YoY driven by yield improvement. While English
papers’ ad revenues grew 18% YoY, Hindi papers’ ad revenues were up +15%
YoY, still strong but lower growth than before. This was on account of the high
base of last year. Going forward, management has guided to soft ad growth for
the industry near term (driven entirely by yield improvements) with interest rate
sensitive sectors (real estate/financials) cutting down on ad spending. HT
remained confident in its ability to register above industry ad growth rates.
Cross selling efficiencies partly mitigating rising newsprint costs. 1Q
EBITDA margins declined 180bps and management noted that high newsprint
costs continue to be a pressure point. HT is mitigating the impact through better
vendor negotiations, value engineering and changing mix of domestic/imported
newsprint. In addition, HT is now cross selling and bundling advertising
inventory across divisions like radio, print and digital media. This strategy is
driving better utilisation levels, while also offering benefits of operating
leverage.
Non print businesses faring better. Radio business EBITDA margin improved
to 16% vs near zero last year, as inventory utilisation levels picked up sharply
(almost 100% in Delhi). Phase III FM radio licensing could provide opportunity
for HT to scale up the radio business. HT Burda, the printing JV achieved
EBITDA breakeven with healthy pipeline of domestic and international printing
orders giving good visibility of growth ahead. Digital business (internet)
revenues grew 38% YoY. While internet business is likely to continue to be loss
making in the near term, we expect losses to be contained at Rs100-150MM pa.
Q1FY12 results summary. Revenues up 23% YoY driven by growth in print
ad revenues (+17% YoY), Radio and entertainment (+75% YoY) and HT Burda
printing revenues (+Rs200MM YoY). EBITDA margins down 180bps YoY due
to higher newsprint costs and employee expenses (up due to increments and
annual bonuses paid in April). Net profits up 24% YoY, boosted by treasury
income on high cash balance. Maintain OW with Mar-12 TP of Rs250.
Key drivers to watch: 1) Margin trend for HT Mumbai and Mint and 2) use of
cash. We would like to see dividend payouts increase from here on, given
improvement in cash flow profile and low capex ahead.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Ad revenue growth remains robust, but some caution ahead. Q1FY12 ad
revenues were up 17% YoY driven by yield improvement. While English
papers’ ad revenues grew 18% YoY, Hindi papers’ ad revenues were up +15%
YoY, still strong but lower growth than before. This was on account of the high
base of last year. Going forward, management has guided to soft ad growth for
the industry near term (driven entirely by yield improvements) with interest rate
sensitive sectors (real estate/financials) cutting down on ad spending. HT
remained confident in its ability to register above industry ad growth rates.
Cross selling efficiencies partly mitigating rising newsprint costs. 1Q
EBITDA margins declined 180bps and management noted that high newsprint
costs continue to be a pressure point. HT is mitigating the impact through better
vendor negotiations, value engineering and changing mix of domestic/imported
newsprint. In addition, HT is now cross selling and bundling advertising
inventory across divisions like radio, print and digital media. This strategy is
driving better utilisation levels, while also offering benefits of operating
leverage.
Non print businesses faring better. Radio business EBITDA margin improved
to 16% vs near zero last year, as inventory utilisation levels picked up sharply
(almost 100% in Delhi). Phase III FM radio licensing could provide opportunity
for HT to scale up the radio business. HT Burda, the printing JV achieved
EBITDA breakeven with healthy pipeline of domestic and international printing
orders giving good visibility of growth ahead. Digital business (internet)
revenues grew 38% YoY. While internet business is likely to continue to be loss
making in the near term, we expect losses to be contained at Rs100-150MM pa.
Q1FY12 results summary. Revenues up 23% YoY driven by growth in print
ad revenues (+17% YoY), Radio and entertainment (+75% YoY) and HT Burda
printing revenues (+Rs200MM YoY). EBITDA margins down 180bps YoY due
to higher newsprint costs and employee expenses (up due to increments and
annual bonuses paid in April). Net profits up 24% YoY, boosted by treasury
income on high cash balance. Maintain OW with Mar-12 TP of Rs250.
Key drivers to watch: 1) Margin trend for HT Mumbai and Mint and 2) use of
cash. We would like to see dividend payouts increase from here on, given
improvement in cash flow profile and low capex ahead.
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