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HT Media: Advertising remains robust - Views on News from Equitymaster
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HT Media: Advertising remains robust
Jul 28, 2010

HT Media has announced its 1QFY11 results. The company has reported a 20% YoY and 44% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Topline increases by 20% YoY during 1QFY11 due to higher advertising revenues.
  • EBITDA margins increase from 17.2% in 1QFY10 to 19.8% during the quarter on the back of lower newsprint costs.
  • Other income declines by 12% YoY during 1QFY11.
  • Bottomline increases by 44% YoY during the quarter on account of better operating margins, despite higher tax outgo.

Consolidated financial snapshot
(Rs m) 1QFY10 1QFY11 Change
Net sales 3,366 4,042 20.1%
Expenditure 2,788 3,243 16.3%
Operating profit (EBDITA) 578 799 38.2%
EBDITA margin (%) 17.2% 19.8%  
Other income 66 58 -11.7%
Interest 79 64 -18.7%
Depreciation 175 194 11.1%
Profit before tax 390 599 53.5%
Tax 111 198 78.6%
Profit after tax/(loss) 280 402 43.5%
Net profit margin (%) 8.3% 9.9%  
No. of shares (m)   235.1  
Diluted earnings per share (Rs)*   6.3  
Price to earnings ratio (x)*   24.8  
On trailing twelve months earnings

What has driven performance in 1QFY11?
  • HT Media reported a 20% YoY growth in topline during 1QFY11. The print segment was driven by a 22% growth in advertisement revenue from volume growth and improvement in price realisation.Circulation revenue grew by 6% YoY driven by higher volumes. During the quarter, revenue from the radio segment recorded a growth of 39% YoY.

  • The company posted operating margins of 20% during 1QFY11 on the back of lower cost of newsprint and the continuing impact of various cost optimisation measures. Increasing contribution from new businesses like Radio and Firefly e-Ventures also helped. During the last quarter, raw material costs declined by 4.5% YoY (as a percentage of sales). Staff cost declined by 0.7%, while advertising & sales promotion increased by 1.3% (as a percentage of sales) during the quarter.

    Cost break-up
    (Rs m) 1QFY10 1QFY11 Change
    Raw materials 1,237 1,303 5.3%
    % sales 36.7% 32.2%  
    Staff cost 646 749 16.0%
    % sales 19.2% 18.5%  
    Advertising & sales promotion 195 285 46.2%
    % sales 5.8% 7.1%  
    Other expenditure 710 905 27.6%
    % sales 21.1% 22.4%  
    Total cost 2,593 2,958 14.1%
    % sales 82.8% 80.2%  

  • The HT group listed Hindustan Media Ventures. The Hindi business clocked a topline growth of 20% YoY during 1QFY11 on the back of a 24% YoY increase in advertising revenues and a 4% increase in circulation revenues.

  • HT Media’s business daily ‘Mint’ was launched in Ahmedabad, making it the 6th printing location. Users registration on its jop portal ‘Shine.com’ has crossed 5 m during the quarter reflecting strong user traction. In the radio business, ‘Fever 104’ registered 39% YoY growth in revenues largely driven by higher volumes.

  • As on 30th June, 2010 the company has a net debt of Rs 700 m and net fixed assets of Rs 8,605 m.

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 155, the company is trading at 25 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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