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HT Media: Tough times ahead - Views on News from Equitymaster

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HT Media: Tough times ahead
Jan 29, 2009

HT Media had announced its 3QFY09 results recently. The company hosted a conference call post the result announcement in which the management gave further details. Following are they excerpts. Hindustan Times continuous to be the number 2 player in the English segment, while Hindustan is the third largest Hindi player in the country. Mint has also earned the number two spot in the business daily segment.

Revenue front: The company’s ad revenues during the quarter have increased by 4.6% YoY. These however include revenues from partnership for the growth model to the tune of Rs 260 m (Rs 30 m in 3QFY08). It is non cash earning and the company has made investments to the tune of Rs 1.7 bn. Excluding this, the ad revenues have fallen by 4% YoY. While the company has done well on the readership front, it witnessed flat circulation growth for Mint and Hindustan Times (HT). Hindustan however saw a 20% YoY jump in circulation. On the revenue front, HT and Mint saw a 10% YoY growth, while Hindustan reported a 30% YoY growth. HT Media has taken hike in cover prices for Hindustan and Mint in the range of 50 paisa to Re 1. Recruitments, realty, financial services and automobiles, which are the key advertisers, have reported slowdown in ad spends. The overall macro environment saw a gloomy quarter. The metro regions were the worst affected and hence the performance of HT was affected. However, with smaller towns doing well, the company expects its Hindi venture to do well.

Other ventures: Seeing a huge opportunity in mobile telephone marketing, HT Media has formed the JV with Velti Plc. This is expected to offer the company a first mover advantage. It will also be merging its radio business with itself from the next quarter. Ht Media expects this venture to breakeven within the next six months. For the internet business, the company is planning a capex of Rs 250 m in FY10. Shine.com, its job portal is expected to breakeven in the next 2 to 3 years.

Margin front: The high newsprint prices and unfavourable exchange rates impacted the margins of the company during 3QFY09. The newsprint accounts for 40% of HT Media’s sales. The prices had touched the highs of US$ 960 per metric tonne in October last year. The management expects the prices to go down to US$ 600 per metric tonne in the coming quarters. However, the benefit will flow in from next fiscal.

HT Media spent Rs 2.2 bn on the capex this fiscal and expects to spend around Rs 400 m next year. It has net debt of Rs 4.9 bn.

Going forward
The coming quarters are likely to be tough for the company. Till the ad volumes pick up, the company would face pressure on all the fronts. Also its new ventures would take time to breakeven on account of slowdown. While the company is taking steps to curb expenses, the newsprint prices would be the deciding factor. We shall soon review our estimates for the stock.

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