HT Media - Ad growth to bounce back - Centrum

HT Media posted better than expected Q3FY13 results with ad revenue growth of 1.9%. English print continues to de-grow but is expected to bouce back from Q4FY13 onwards. Margins expanded on the back of low RM cost and marginal growth in employee and other expenditure. Other businesses continued to be in the red impacting margins. We maintain BUY rating on the stock.

Results above expectations: HT Media posted results above expectations with topline at Rs5470mn (up 3.9% YoY) on the back of 1.9% YoY increase in advertising revenue coupled with 12.1% increase in circulation revenues. Operating profit was up 12.6% YoY while PAT was up at Rs536mn (22% above our estimates).

Ad growth on a positive trajectory: During the quarter, English segment declined by 2.5% YoY while Hindi growth was up by 15% YoY. Comparatively for the company, advertising revenue increased by 1.9% YoY to Rs4149mn. Delhi market declined by 3% YoY while Mumbai posted a growth of 13%. For the Hindi daily, growth was more in local advertising with UP posting healthy growth. Sectors such as education, BFSI and real estate continued to de-grow and impact revenue growth.

Hindi business gaining traction: HMVL's revenue grew by 15% to Rs1622mn on the back of 15% increase in advertising revenue while circulation revenue grew by 15%. The publication division continued to gain traction through increasing circulation, rise in cover prices and steady increase in readership. PAT was also up by 92% YoY to Rs208mn on the back of margin expansion and high other income.

Investment continues in new verticals: In the radio business, the company posted revenue of 213mn (up 22% YoY) while EBIT profit was at Rs25mn on the back of increase in pricing in the Delhi market coupled with market share gain. In the internet & digital division the company posted revenue of Rs137mn with an EBIT loss of Rs88mn against loss of Rs99mn. HT Burda posted sluggish results with revenue of Rs29mn and operating loss of Rs13mn. Management maintained that they will continue to invest in digital and education businesses.

Margins expand: Operating margins expanded by 124bps YoY to Rs16%. Raw material cost declined by 0.4% YoY and 5.2% QoQ on the back of lower pagination, consumption of more domestic newsprint along with flat newsprint prices. Management maintained that newsprint prices were currently at Rs34275/tone and the benefits would accrue in FY14. Employee cost was up by 4.8% YoY but down 5.2% QoQ while admin & other expenditure was up by mere 4.2% YoY.

Maintain BUY: The stock is currently trading at 13.9x and 12.1x FY13E and FY14E respectively. We value the company at 14x FY14E with our target price of Rs118 and maintain BUY rating on the stock.

Source : Equity Bulls

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