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HT Media 2QFY2013 performance highlights and results update

Contributed by Angel Broking

For 2QFY2013, HT Media reported a weak performance on the earnings front. The company’s bottom-line declined by ~24.1% yoy to Rs.33cr on account of margin pressure due to sluggish top-line performance and increase in raw materials cost and staff costs.

Key highlights for the quarter: The company reported a subdued top-line growth of 4.5% yoy to Rs.511cr due to a 1.4% yoy decline in advertipsing revenues to Rs.364cr, offset by a healthy 11.0% yoy rise in circulation revenue to Rs.56cr (on account of higher circulation and increase in cover prices). In terms of other segments, the radio segment contributed Rs.20cr and HT Burda contributed Rs.21cr to the top-line. On the operating front, the OPM contracted by 331bp yoy to 11.1% due to a 6.9% yoy increase in raw material costs and 21.8% yoy increase in staff costs.

Outlook and valuation: At the current market price, HT Media is trading at 11.6x FY2014E consolidated EPS of Rs.8.3. We maintain our Buy recommendation on the stock with a target price of Rs.113, based on 14x FY2014E EPS (at ~15% discount to our target multiple for Hindi print media players). Downside risks to our estimates include 1) a sharp rise in newsprint prices in INR terms, and 2) higher-than-expected losses/increase in the breakeven period of emerging editions and digital business.