HT Media - Ad growth bounces back - Centrum

HT Media posted Q1FY14 results above expectation with net sales at Rs5409mn on the back of healthy 9.9%YoY growth in ads and 15.8% in circulation. Operating profit was up by 16.6% following 77bps OPM expansion as RM cost declined by 1.2%YoY due to lower newsprint consumption. Adj PAT after MI was up 16.8% YoY (9.7% above expectations) to Rs475mn. We maintain BUY rating on the stock.

Q1FY14 results above estimates: HT Media posted net sales of Rs5409mn (up 10.4% YoY), 2% above our estimates on the back of healthy 9.9%YoY growth in ads and 15.8%YoY in circulation. Operating margins expanded by a healthy 77bps on a consolidated basis due to RM cost declining by 1.2%YoY. Hence, operating profit was up by 16.6%YoY (5.3% above our estimates) to Rs780mn while PAT was high at Rs475mn, up 16.8% YoY.

Healthy topline growth: Ad growth was up 9.9%YoY on the back of strong growth of 8.2% YoY in English print and 13.7% YoY in Hindi of which bulk of the growth came from volumes. Sectors such as government, durables, telecom, real estate and retail showed strong growth during the quarter. Management has guided for 12-14% growth for Hindi print and is confident of double digit ad growth on a consolidated basis. Circulation growth, both in Hindi and English print, was due to prudent cover price hikes while circulation remained flat for the quarter.

Other businesses: Radio business posted revenue growth of 15% YoY to Rs214mn while EBIT more than doubled to Rs36mn from Rs14mn on the back of prudent cost management. Digital business revenues were up by 41% YoY to Rs170mn while operating losses too were at Rs170mn (up from Rs117mn in Q1FY13) due to an increase in television advertisement for shine.com. But, for the FY14, management maintained its loss guidance of Rs380-400mn. HT Burda revenues were at Rs220mn with operating loss at Rs40mn.

Margins continue to expand: During the quarter, operating margins expanded by 77bps to 14.4% as RM cost declined by 1.2% YoY due to lower newsprint consumption. Admin & other expenses grew by 18.3%YoY on the back of high marketing activity during the quarter. Margins are expected to expand following the turnaround in Mumbai operations in FY14, and in UP in FY15, coupled with high traction in internet business.

Maintain BUY: HT Media is currently trading at 10.4x FY14E and 9.1x FY15E EPS of Rs9.3 and Rs10.5 respectively. We maintain BUY rating on the stock with a target price of Rs127 (12x FY15E).

Source : Equity Bulls

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