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HT Media 3QFY2013 performance highlights and results update

Contributed by Angel Broking

For 3QFY2013, HT Media reported a subdued 4.4% yoy growth in its top-line to Rs.547cr. Its OPM expanded by 109bp yoy to 16% aided by 134bp yoy decline in consumption of raw materials as a percentage of sales (driven by pagination efficiency, cutback in excess circulation in few markets and lower job work). Consequently, the company’s profit grew by a healthy 11.4% yoy to Rs.54cr.

Key highlights for the quarter: Advertising revenue registered a sluggish growth of 2% yoy to Rs.415cr, primarily driven by volume growth. Although the decline in advertising revenue in Delhi continued (real estate, education and BFSI sector continue to be laggards in ad spend), HT Media’s hindi print business subsidiary, HMVL’s ad revenue grew by 15% yoy (aided by strong growth in local ad revenues in UP, Bihar and Jharkhand on back of festive season). The circulation revenue grew by 12.3% yoy to Rs.56.5cr driven by combination of higher circulation and higher realization per copy. In terms of other segments, the radio segment contributed Rs.22cr, HT Burda contributed Rs.29cr while the digital business contributed Rs.14cr to the top-line.

Outlook and valuation: At the current market price, HT Media is trading at 13.0x FY2014E consolidated EPS of Rs.7.8. We recommend Accumulate on the stock with a target price of Rs.113, based on 14.4x FY2014E EPS. 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.