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Research
Hindustan Media Ventures - Margins improve; maintaining estimates; maintain Buy - BRICS
Posted On : 2013-05-18 02:58:49( TIMEZONE : IST )
HMVL's revenue declined 0.1% yoy to Rs1.55bn, due to higher base as a result of UP election related ad revenue. EBITDA margin expanded by 524bps yoy to 18.9%, due to fall in newsprint prices and reduced pagination. We broadly maintain our estimates, but raise TP to Rs190 (from Rs180), as we roll forward to average FY14-15 EPS estimates, while maintaining P/E of 13.5x. Maintain BUY.
Strong growth in circulation: Advertising revenue fell 2.7% yoy to Rs1.1bn, due to one-off UP election related ad revenue recorded in Q4FY12. After adjusting for the one-off, revenue was up13% yoy. Circulation revenue increased 15.6% yoy to Rs400mn, led by higher circulation and better realization. We expect the growth in ad revenue to recover in FY14, partly due to increase in political ads in the run-up to the scheduled Delhi elections, general elections and possible elections in Jharkhand (currently under President's rule).
Cost management helps improve margins: HMVL's margins improved by 127bps sequentially to 18.9%, despite the decline in revenue, due to a fall in newsprint prices, reduced pagination and lower provision for diminution in value of 'Ad for equity' deals. On a yoy basis, margins expanded by 524bps, as losses from the UP expansion reduced. We expect EBITDA losses from new editions to continue tapering down, as the UP editions mature and realisation improves.
Tweaking estimates: We are tweaking our FY14/15 estimates to factor in HMVL's Q4FY13 results. Our revenue estimate for FY14/15 is down 0.7%/0.1%, while EBITDA margin estimate is down 20/4bps. Our EPS estimate is down 1.6% for FY14, but up 0.2% for FY15.
Valuation: Stock trades at 10.3x FY14 and 8.9x FY15 estimates. We raise TP to Rs 190 (from Rs180), as we roll forward to average FY14/15 estimates, based on unchanged P/E of 13.5x. We maintain Buy on HMVL, in view of its leadership in Bihar and Jharkhand, traction in UP, and strong cash balance (Rs3.17bn net cash at FY13 end).
