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HT Media: Advertising feels the heat

Jul 28, 2009

Performance summary
  • Topline increases by 2.4% YoY during 1QFY10 on account of higher circulation.
  • EBITDA margins declined marginally from 21% in 1QFY09 to 20.6% during the quarter.
  • Other income increases by 16% YoY during 1QFY10 due to gains from foreign exchange fluctuation.
  • Bottomline declines by 14% YoY during the quarter on account of higher interest, depreciation charges and write off in investments.

Standalone financial snapshot
(Rs m) 1QFY09 1QFY10 Change
Net sales 3,272 3,351 2.4%
Expenditure 2,584 2,660 2.9%
Operating profit (EBDITA) 688 690 0.3%
EBDITA margin (%) 21.0% 20.6%  
Other income 57 66 16.1%
Interest 51 78 52.5%
Depreciation 129 164 27.2%
Profit before tax 565 515 -9.0%
Exceptional item - (45)  
Tax 188 146 -22.5%
Profit after tax/(loss) 377 324 -14.1%
Net profit margin (%) 11.5% 9.7%  
No. of shares (m)   235.1  
Diluted earnings per share (Rs)*   3.4  
Price to earnings ratio (x)*   32.7  
*On trailing 12 months earnings

What has driven performance in 1QFY10?
  • HT Media registered a topline growth of 2% YoY during 1QFY10. Circulation revenues increased by 24% from Rs 358 m in 1QFY09 to Rs 444 m this quarter due to improved realisation and increase in cover prices. The company has also merged its radio business, which accounted for Rs 88 m. However, these increases have been offset by a marginal decline in advertisement revenues to Rs. 2.78 bn in 1QFY10 from Rs. 2.81 bn 1QFY09.

  • The advertising market continues to remain slack. In the conference call, the management of HT Media indicated that the English advertisement segment declined by 12% YoY during 1QFY10, while the Hindi segment and Mint increased by 32% and 24% respectively. The decline in English advertising was on account of the elections during which media agencies went for national campaigns and preferred the TV media over print.

  • On the costs front, while staff costs increased by 3.3% YoY during the quarter, it was offset by advertising & sales promotion costs, which were lower by 2.9%. Inventory costs on newsprint continue to remain high. The increase in staff costs was on account of accrual of bonus and additional staff on account of the hindi editions and merger of the radio business.

  • HT Media relaunced the Hindustan Times in July 2009. The company commissioned a printing facility at Mumbai during 1QFY10. Besides, the business daily ‘Mint’ was launched in Kolkata and Chennai. Mint already has editions in Delhi, Mumbai, Bengaluru, Chandigarh and Pune. The Hindi publication Hindustan continues to show good growth. The FM radio station ‘Fever 104’ is presently among the top 3 in Delhi, Mumbai and Bengaluru. The company’s internet job portal has crossed 2.5 m registered candidates.

  • The exceptional item of Rs 45 m is due to the dimunition in value of investment in the ioint venture company, Metropolitan Media.

  • HT Media had a net debt of Rs 1.8 bn as of 30th June, 2009.

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 further capex plans of Rs 800 m 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 111, the company is trading at 32.7 times it trailing 12 months earnings. We shall soon update our view on the stock.

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