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HT Media: Advertising makes a comeback

May 12, 2010

HT Media has announced its FY10 results. The company has reported a 5.8% YoY growth in sales, while the bottomline has turned positive. Here is our analysis of the results.

Performance summary
  • Topline increases by 12.5% YoY during 4QFY10 due to higher advertising revenues.
  • EBITDA margins increase from 7.3% in 4QFY09 to 24.1% during the quarter on the back of lower newsprint costs.
  • Other income declines by 16% YoY during 4QFY10.
  • Bottomline zooms 9 times during the quarter on account of better operating margins, despite higher tax outgo.
  • During FY10, topline increases by 5.8% YoY while bottomline turns positive.
  • Board recommends a dividend of Rs 0.36 per equity share.

Consolidated financial snapshot
(Rs m) 4QFY09 4QFY10 Change FY09 FY10 Change
Net sales 3,424 3,851 12.5% 13,591 14,379 5.8%
Expenditure 3,173 2,922 -7.9% 12,587 11,575 -8.0%
Operating profit (EBDITA) 251 929 270.5% 1,004 2,804 179.3%
EBDITA margin (%) 7.3% 24.1%   7.4% 19.5%  
Other income 54 45 -16.1% 206 159 -22.8%
Interest 91 71 -22.3% 323 295 -8.7%
Depreciation 167 181 8.3% 688 707 2.8%
Profit before tax 47 723 1447.5% 199 1,961 885.4%
Exceptional item 62 15   189 69  
Tax (68) 222   125 537 329.6%
Profit after tax/(loss) 53 485 822.8% (115) 1,355  
Net profit margin (%) 1.5% 12.6%   -0.8% 9.4%  
No. of shares (m)         235  
Diluted earnings per share (Rs)         5.8  
Price to earnings ratio (x)         26.4  

What has driven performance in FY10?
  • HT Media reported a 5.8% YoY growth in topline during FY10. The print segment was driven by a 20% growth in circulation revenue due to rise in circulation numbers and improved realisations. Advertisement revenue registered an increase of 1%. During 4QFY10 however, advertisement revenue grew by 8% YoY outpacing circulation revenue, which grew by 5% YoY. For the full year, revenue from the radio segment recorded a growth of 52% on account of increased advertising.

  • 'Hindustan times' now has a readership of 2.2 m in Delhi and 0.5 m in Mumbai. The company’s Hindi daily, 'Hindustan', was the pick of the lot with a readership of 9.9 m. It is currently the number 3 national daily. HT Media’s business daily, 'Mint' has a readership of 158,000.

  • 'The company posted operating margins of 20% during FY10 on the back of lower cost of newsprint and the continuing impact of various cost optimisation measures. During the last quarter, raw material costs declined by 9.7% YoY (as a percentage of sales). Staff cost and advertising & sales promotion also declined by 3% each as a percentage of sales.

    Cost break-up
    (Rs m) 4QFY09 4QFY10 Change
    Raw materials 1,358 1,155 -14.9%
    % sales 39.7% 30.0%  
    Staff cost 670 631 -5.8%
    % sales 19.6% 16.4%  
    Advertising & sales promotion 332 270 -18.7%
    % sales 9.7% 7.0%  
    Other expenditure 813 866 6.5%
    % sales 23.7% 22.5%  
    Total cost 3,173 2,922 -7.9%
    % sales 92.7% 75.9%  

  • HT Media launched a new daily broadsheet newspaper 'htedge' in Delhi NCR in May. It is targeted towards the readers in the age group of 18-24 years. HT Burda Media has commenced production through commissioning of a new printing unit in March. The facility is located in Greater Noida. It has has already won its first major international printing contract for approximately Rs 1 bn with Outiror, a market leader in France for retail selling.

  • Post the demerger of 'Hindustan' into Hindustan Media Ventures, the company has initiated the IPO process and consequently filed a Draft Red Herring Prospectus in March.

  • HT Media's radio business has turned EBITDA positive in 4QFY10. The company's job portal Shine.com reached the markt of 4 m registered users.

  • As on 31st March, 2010, the company had a debt of Rs 3 bn and cash of Rs 1 bn on its books.

What to expect?
HT Media’s investment of around Rs 1.5 bn in its Mumbai press and the relauch of 'Hindustan Times'has increased its presence in the Mumbai markets. The Hindi daily market is the most dynamic segment in the Indian print industry and the company is a major participant through 'Hindustan'. The company has broken even at the operating level on the radio segment although it still incurs EBITDA level losses in the internet business.

At the current share price of Rs 152, the company is trading at 26 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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