HT Media - Margin expansion - Centrum

HT Media posted marginally below than expected Q4FY13 results with net sales at Rs5005mn on the back of mere 1.1%YoY ad growth and 18.8% circulation growth. English print posted positive ad growth with Delhi market growing at ~3%YoY on lower base. Margin expansion on back of lower newsprint cost and lower A&P spend aided 49%YoY growth in operating profit (2.8% above our expectations). Adj PAT after MI was up by 82.3% YoY to Rs401mn. We maintain our BUY rating on the stock.

- Q4FY13 results below estimates: HT Media posted net sales of Rs5005mn (up 1.3% YoY), 3% above our estimates on the back of mere 1.1%YoY ad growth and 18.8%YoY circulation growth. Operating margins expanded by a healthy 458bps on a consolidated basis on the back of tightly controlled admin & other expenses which de-grew by 4.9% YoY as A&P was lower during the quarter and RM cost was down 9.8%YoY. Hence operating profit was up by 49%YoY (2.8% above our estimates) to Rs718mn while PAT was high at Rs401mn, up 82% YoY.

- English edition had positive ad growth: Advertisement growth for Hindi print was down 2.8% YoY, however ex-UP elections and govt ads the growth was 13% YoY. For English print the growth in Delhi market was ~3%YoY (after 4 quarters of negative growth) on lower base while growth in Mumbai was 25%. Sectors such as retail, telecom, handset equipments, entertainment, tenders and Govt. ads boosted ad growth. Management remain confident to post double digit ad growth in FY14E.

- Margins continue to expand: During the quarter operating margins expanded by 458bps to 14.3% as the RM cost declined by 9.8% YoY on back of decline is grammage, pagination levels and quality mix. Newsprint prices were lower by 1% at Rs33,700/tonne during the quarter. Admin & other expenses de-grew by 4.9%YoY on back of lower marketing activity during the quarter. Going forward we expect the margins to expand as company has sold Burda business which was making operating losses, higher return from radio, Mumbai business being at an inflection point coupled with operating leverage from Delhi and Bihar market along with higher margins from internet.

- Other highlights: During the quarter the company sold its stake in HT Burda for Rs600mn. Further they have approved buy-back for a price not exceeding Rs110/share upto an aggregate amount not exceeding Rs250mn. Dividend was maintained at Rs0.4/share.

- Maintain BUY: We have decreased our FY14/FY15 revenues on back of sale of the HT Burda stake while operating profit have been increased by 8.5%/1.2% on the back of higher margins and reduction in losses while PAT has been increased by 10%/3.1% for FY14E and FY15E respectively on the back of higher operating profit. HT Media is currently trading at 10.8x FY14E and 9.5x FY15E EPS of Rs9.3 and Rs10.5 respectively. We roll forward our multiple to FY15E and maintain BUY rating on the stock with target price of Rs127 (12x FY15E).

Source : Equity Bulls

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