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HT Media - Weakness in advertising persists; cutting estimates - BRICS
Posted On : 2012-10-16 20:31:33( TIMEZONE : IST )
HT Media Ltd. (HTML) reported revenue of Rs5.1bn, up 3.6% yoy, led by a better performance by the radio segment. Advertising revenue remained weak, due to a slowdown in consumption. We broadly maintain our revenue estimates, but lower our FY13/14 EPS estimates by 11%, on account of HTML's continued investment in new businesses and higher employee costs. We reduce our target price to Rs100 (from Rs104), while rolling over to our FY14 estimates. Maintain Add.
Weak revenue momentum in core business: HTML reported revenue of Rs5.1bn, up 3.6% yoy and marginally ahead of our expectation. Advertising revenue from the print segment declined 1% yoy to Rs3.64bn, while circulation revenue increased by 11% yoy to Rs563mn. The English print business, which contributed 53% of the total revenue, reported a decline of 2.8% yoy in revenue, on account of the overall weakness in the English print advertisement market. However, revenue of the radio segment increased by 27% yoy to Rs199mn, due to higher realization. HTML continued to witness good traction in the digital segment, which recorded a growth of 33% yoy in revenue to Rs133mn.
Raw material and employee costs lead to margin erosion: The EBITDA margin was down 340bps yoy and 260bps qoq to 11.1%, due to higher raw material costs and employee expenditure. Management continues to invest in new ventures in the digital and education segments, which will maintain pressure on the company's margins.
Outlook and valuation: The stock trades at a P/E of 14.2x FY13 and 11.9x FY14 estimates. We reduce our target price to Rs100 (from Rs104), based on a P/E of 12.5x our FY14 EPS estimates. There is no material change in the advertisement market, as weakness persists and margin pressure will continue due to HTML's investments in new businesses. Over the longer term, HTML's tie-up with "The Hindu" will help it reach out to a wider advertiser base. HTML has net cash of Rs5.45bn. Maintain Add.
