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HT Media: Circulation revenues drive the show - Views on News from Equitymaster
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HT Media: Circulation revenues drive the show
Jan 19, 2010

Performance summary
  • Topline increases by 5.9% YoY during 3QFY10 due to higher circulation revenues.
  • EBITDA margins increase from 6.3% in 3QFY09 to 20.3% during the quarter on the back of better pricing, lower newsprint costs and cost rationalisation.
  • Other income declines by 62% YoY during 3QFY10.
  • Bottomline turns positive during the quarter on account of better operating margins, despite higher tax outgo.
  • During 9mFY10, topline increases by 3.6% YoY while bottomline turns positive.

Consolidated financial snapshot
(Rs m) 3QFY09 3QFY10 Change 9mFY09 9mFY10 Change
Net sales 3,457 3,661 5.9% 10,167 10,528 3.6%
Expenditure 3,239 2,916 -10.0% 9,414 8,653 -8.1%
Operating profit (EBDITA) 218 745 241.7% 753 1,875 149.0%
EBDITA margin (%) 6.3% 20.3%   7.4% 17.8%  
Other income 50 19 -62.0% 152 114 -25.0%
Interest 103 72 -30.1% 232 224 -3.4%
Depreciation 181 165 -8.8% 521 527 1.2%
Profit before tax (16) 527   152 1,238 714.5%
Exceptional item 128 14   128 54  
Tax 24 160 566.7% 193 314 62.7%
Profit after tax/(loss) (168) 353   (169) 870  
Net profit margin (%) -4.9% 9.6%   -1.7% 8.3%  
No. of shares (m)         235  
Diluted earnings per share (Rs)*         3.9  
Price to earnings ratio (x)*         42.5  
*On trailing 12 months earnings

What has driven performance in 3QFY10?
  • HT Media posted a 6% YoY growth in topline during 3QFY10 on the back of a 30% increase in circulation revenues due to higher number of copies circulated as well as higher cover prices effective 1QFY10. The topline also includes Rs 101 m from the radio business. Advertising revenues have posted a 3% YoY growth during the quarter.

  • HT Media’s operating margin grew from 6.3% in 3QFY09 to 20.3% during the quarter on the back of lower raw material costs, which declined by 12% (as a percentage of sales). This was on the back of declining newsprint costs as well as continuing impact of various cost optimisation measures such as reduced paginations, manpower optimization and rationalisation of overheads.

    Cost break-up
    (Rs m) 3QFY09 3QFY10 Change
    Raw materials 1,493 1,135 -24.0%
    % sales 43.2% 31.0%  
    Staff cost 588 621 5.6%
    % sales 17.0% 17.0%  
    Advertising & sales promotion 391 350 -10.5%
    % sales 11.3% 9.6%  
    Other expenditure 767 810 5.6%
    % sales 22.2% 22.1%  
    Total cost 3,239 2,916 -10.0%
    % sales 93.7% 79.7%  

  • The exceptional items is on account of provision for diminution in the value of long-term investments in its joint venture, Metropolitan Media.

  • As per the Indian Readership Survey R2, 2009, ‘Hindustan Times’ maintained its No. 1 position in readership in Delhi NCR market while becoming the fastest growing daily newspaper in the Mumbai market amongst the youth segment. However, there is a marginal decrease in overall readership to 3.4 m readers.

  • HT Media witnessed robust growth in its Hindi business. Revenues grew by 15% and operating margins were around 16%. HT Media demerged its Hindi business- the daily ‘Hindustan’, the magazines ‘Nandan’ & ‘Kadambini’, and the internet portals of these publications, during the quarter to Hindustan Media Ventures, a 99.3% owned subsidiary. The lump sum cash consideration was Rs 1.4 bn.

  • ‘Mint’ maintained its position as the second largest business daily despite a marginal decline in readership to 1,57,000. As of now, it is focusing more on building the brand rather than profitability. The number of users registered on ‘Shine.com’, the job portal by the company through a wholly owned subsidiary Firefly e-Ventures, has crossed the 3.5 m mark.

What to expect?
HT Media has invested around Rs 1.5 bn in its Mumbai press inorder to increase its presence in the Mumbai markets. It has capex plans of Rs 1.25 bn for the fiscal, out of which about Rs 400 m will go towards the Burda joint venture. The company expects to break even on the radio segment by the end of FY10, while EBITDA level losses in the internet business are expected to be around Rs 480 m.

At the current share price of Rs 167, the company is trading at 43 times it trailing 12 months earnings. While the company has good growth prospects, we believe the stock is richly valued at this juncture.

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