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HT Media: Ads slow down revenue growth - Views on News from Equitymaster
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HT Media: Ads slow down revenue growth
May 23, 2012

HT Media announced the fourth quarter results of financial year 2011-2012.The company has reported a 5.7% YoY increase in top line and 58.5% fall in net profits respectively. Here is our analysis of the results.

Performance summary
  • Top line increased by 5.7% YoY during the quarter and by 12.8% YoY for the full year.
  • Operating margins fell drastically by nearly 9% in 4QFY12 on account of higher operating expenditure.
  • Interest expenses zoomed by 31.8% YoY during the quarter and by 46.9% YoY during the entire financial year.
  • Net profits registered a fall of 58.5% YoY during the March quarter. The same fell by 8.5% YoY during the fiscal.
  • The company has declared a dividend of Rs 0.4 per share implying a dividend yield of 0.4% at current prices.


Financial performance snapshot
(Rs m) 4QFY11 4QFY12 Change FY11 FY12 Change
Net sales 4,673 4,941 5.7% 17,762 20,030 12.8%
Expenditure 3,810 4,459 17.0% 14,442 17,161 18.8%
Operating profit (EBDITA) 862 482 -44.1% 3,320 2,869 -13.6%
EBDITA margin (%) 18.5% 9.8% 8.7% 18.7% 14.3% 4.4%
Other income 138 179 29.3% 340 750 120.6%
Interest 79 104 31.8% 247 362 46.9%
Depreciation & amortisation 220 249 13.5% 842 916 8.7%
Profit before tax 702 308 -56.2% 2,571 2,341 -8.9%
Profit before tax margin (%) 15.0% 6.2%   14.5% 11.7%  
Exceptional items - -   - -  
Tax 166 81 -51.1% 713 626 -12.2%
Profit after tax before moinority 536 226 -57.8% 1,858 1,715 -7.7%
Share of minority 6 6   49 60  
Profit after tax 529 220 -58.5% 1,809 1,655 -8.5%
Net profit margin (%) 11.3% 4.5%   10.2% 8.3%  
No. of shares (m)         235.0  
Diluted earnings per share (Rs)*         7.0  
P/E (x)         16.2  
(*trailing twelve month earnings)

What has driven performance in 4QFY12?
  • Topline rose by 5.7% YoY during the quarter. Advertising had a dismal performance and grew by only 3% YoY during the quarter. For the full year, the performance was slightly better whereby advertising grew by 11% YoY. Growth in subscriptions was 3% YoY for the quarter and 8% YoY for the full year.

  • On the cost front, consumption of raw materials was up by 13% YoY during the March quarter on account of higher cost of newsprint. As a percentage of total sales, raw materials moved from 35% to 37% during last 3 months.

  • Employee costs were up by 17% YoY this quarter. The same level of increase in employee costs was witnessed for the year too at 18% YoY.

    Cost break-up
    (% of sales) 4QFY11 4QFY12 Change FY11 FY12 Change
    Raw materials consumed 1,634 1,827 11.8% 6,200 7,231 16.6%
    % sales 35.0% 37.0%   34.9% 36.1%  
    Staff cost 766 897 17.1% 3,009 3,562 18.4%
    % sales 16.4% 18.2%   16.9% 17.8%  
    Other expenses 1,411 1,735 23.0% 5,233 6,368 21.7%
    % sales 30.2% 35.1%   29.5% 31.8%  
    Total expenditure 3,810 4,459   14,442 17,161  

  • Other expenses jumped by 23% YoY and 22% YoY during the quarter and the full year 2011-12. This implied that other expenses as a percentage of sales inched higher by 5% to 35% during the quarter. The rise in this expense head was due to increase in scale of operations, forex related losses and provision for dilution of investments.

  • The readership for the flagship English daily ‘Hindustan Times' was up by 4% YoY over Indian Readership Survey (IRS) Q42010. Hindustan, the Hindi daily registered an increase of 5.2% YoY in readership numbers.

  • HT Media's continued focus on digital business is yielding returns in the form of increased revenues. Revenues from the digital business were up by 25% YoY as compared to March 2011.

  • Interest expenses zoomed by 31.8% YoY during the quarter and by 46.9% YoY during the entire financial year.

  • As a result of disappointing performance at the operating level and higher interest and depreciation, HT media posted a net profit de growth of 58.5% YoY during the quarter. The net profits for the whole year were down by 8.5% YoY.

What to expect?
HT Media's dismal performance in advertising segment led to the company reporting abysmally low growth in the last quarter. Advertisements as we know are single most important source of revenues for media companies these days. With economic scenario showing no signs of improvement in the near future, ad revenues would continue to be under pressure. Also, the company has not been able to contain its rising operating expenditure. HT Media recently forayed into the education space but going forward the company wants to focus on existing ventures and will not be looking at newer opportunities. At the current price of Rs 114, the stock is trading at a multiple of 11 times our estimated FY14 earnings. Keeping above points into consideration, we maintain our negative view on the stock.

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