Hindustan Media Ventures - Revenue growth in-line, raising estimates - BRICS

Hindustan Media Ventures (HMVL) reported a revenue growth of 3.3% yoy, on back of a growth of 1% yoy in advertising revenue and 16% yoy in circulation revenue. The EBITDA margin improved by 165bps sequentially to 17.9%, as lower raw material expenses more than offset the increase of 7% qoq in employee costs. We broadly maintain our revenue estimates, but raise our FY13 and FY14 EPS estimates by 11% and 1% respectively, mainly on account of HMVL's higher than expected treasury income. We raise our target price to Rs180 (from Rs155), as we rollover to our FY14 estimates. Maintain Buy.

Muted growth in advertising revenue: HMVL reported an increase of 1.2% yoy in advertising revenue to Rs1.15bn, on the back of higher volumes. Circulation revenue also increased by 16.2% to Rs387mn, led by higher circulation and better realization. We expect HMVL to maintain a higher growth in circulation revenue, as the hike in subscription prices for its newly launched UP editions will continue.

Margins improve sequentially: Despite an increase in employee costs, HMVL's margins improved by 130bps sequentially, due to a decline of 4.1% in raw material costs, as a result of lower newsprint prices. However, the company's margins declined by 180bps yoy, due to its expansion in UP. We expect the EBITDA losses from its new editions to continue to taper down, as the UP editions mature and realization improves.

Outlook and valuation: The stock trades at a P/E of 10.8x FY13 and 8.9xFY14 estimates. We raise our target price to Rs180 (from Rs155), based on a P/E multiple of 13.5x, as we roll over to our FY14 estimates. We maintain our Buy rating on HMVL, based on its leadership position inthe core markets of Bihar and Jharkhand (growth of 10-15% yoy), traction in the UP market (growth of20% yoy) and strong cash position (Rs2.5bn of net cash at the end of Q2FY13), and possibility of a higher improvement in its ad-yield than its peer group, when there is an upturn in the advertising market.

Source : Equity Bulls

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