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HT Media 4QFY2014 performance highlights and results update

May 13, 2014, Tuesday, 14:03 GMT | 09:03 EST | 17:33 IST | 20:03 SGT
Contributed by Angel Broking

For 4QFY2014, HT Media reported a modest 8.7% yoy growth in its top-line to Rs.544cr (slightly ahead of our estimates of Rs.532cr), aided by strong growth in advertising revenues from Hindi editions. Overall, the company registered a 10.4% yoy growth in advertising revenue to Rs.417cr and 14.1% yoy growth in circulation revenue to Rs.66cr. On the operating front, the OPM contracted by 47bp yoy to 13.9% while the net profit declined by 13.1% yoy to Rs.35cr (our expectation was of Rs.45cr).

Sluggish growth in English ad revenues: Although HT Media’s Hindi subsidiary - HMVL registered a double digit advertising growth (20.3% yoy to Rs.133cr on back of increase in yields and volume), the English advertising revenue grew by only 6.4% yoy to Rs.284cr, primarily due to sluggish advertising growth in HT Media’s Delhi market. However, the Management expects English advertising yield to go up over FY2015, leading to improvement in English advertising revenues.

Net profit dragged down by reversal of deferred tax asset: On the operating front, print business reported 14.1% yoy growth in EBIT to Rs.78cr. The digital business continued to report an EBIT level loss to the tune of Rs.7-8cr while the radio business reported an EBIT level profit of Rs.5cr. Further, reversal of deferred tax asset (of Rs.19cr related to HT Burda subsidiary) led to a 13.1% yoy decline in net profit to Rs.35cr.

Outlook and valuation: At the current market price, HT Media is trading at attractive valuations of 8.9x FY2016E consolidated EPS of Rs.10.3. Considering the expectation of improvement in English advertising yields and stable exchange rate, we maintain Buy on the stock with a target price of Rs.110. 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.