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HT Media: Lower newsprint costs kick in - Views on News from Equitymaster
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HT Media: Lower newsprint costs kick in
Oct 28, 2009

Performance summary
  • Topline increases by 4.2% YoY during 2QFY10 due to higher circulation revenues.
  • EBITDA margins increase from 12% in 2QFY09 to 19% during the quarter on the back of lower newsprint costs.
  • Other income declines by 44% YoY during 2QFY10.
  • Bottomline increases by 93% YoY during the quarter on account of better operating margins.

Standalone financial snapshot
(Rs m) 2QFY09 2QFY10 Change 1HFY09 1HFY10 Change
Net sales 3,342 3,481 4.2% 6,614 6,831 3.3%
Expenditure 2,943 2,824 -4.0% 5,527 5,485 -0.8%
Operating profit (EBDITA) 399 656 64.6% 1,087 1,346 23.9%
EBDITA margin (%) 11.9% 18.9%   16.4% 19.7%  
Other income 52 29 -43.8% 108 95 -12.6%
Interest 74 75 1.6% 125 152 22.4%
Depreciation 128 175 36.4% 257 339 31.8%
Profit before tax 249 436 75.3% 814 950 16.8%
Exceptional item   40     85  
Tax 86 81 -5.0% 274 227 -17.1%
Profit after tax/(loss) 163 314 92.9% 540 638 18.2%
Net profit margin (%) 4.9% 9.0%   8.2% 9.3%  
No. of shares (m)         235  
Diluted earnings per share (Rs)*         4.0  
Price to earnings ratio (x)*         30.9  
*On trailing 12 months earnings

What has driven performance in 2QFY10?
  • HT Media posted a 4% YoY growth in topline during 2QFY10 on the back of a 28% increase in circulation revenues due to higher cover prices. The topline also includes Rs 98 m from the merger of the radio business. Advertising revenues have posted a marginal decline during the quarter.

  • HT Media’s operating margin grew from 12% in 2QFY09 to 19% during the quarter on the back of lower raw material costs, which declined by 8% (as a percentage of sales). This was on the back of declining newsprint costs as high cost inventory was used up.
    Cost break-up
    (Rs m) 2QFY09 2QFY10 Change
    Raw materials 1,463 1,230 -16.0%
    % sales 43.8% 35.3%  
    Staff cost 496 549 10.8%
    % sales 14.8% 15.8%  
    Advertising & sales promotion 318 316 -0.5%
    % sales 9.5% 9.1%  
    Other expenditure 666 730 9.5%
    % sales 19.9% 21.0%  
    Total cost 2,625 2,508 -4.5%
    % sales 88.1% 81.1%  

  • The exceptional items is on account of provision for diminution in the value of long-term investments.

  • HT Media witnessed strong growth from its Hindi segment with revenues from ‘Hindustan’ grow ing by 23% with an EBITDA margin of 20%. The company is continuing its expansion plans with the commissioning of new printing facilities at Bareilly, Uttar Pradesh.

  • HT Media expects its business publication ‘Mint’ to become profitable in 2QFY11. As of now, it is focusing more on building the brand rather than profitability. The company’s radio business witnessed some stability as it figured in the top 3 players in Delhi and Bengaluru. The number of users registered on ‘Shine.com’, the job portal by the company through a wholly owned subsidiary Firefly e-Ventures, has crossed the 3 m mark. During the quarter, the company has launched its mobile marketing and advertising services through a wholly owned subsidiary in collaboration with Velti Plc.

  • The company had a net debt of Rs 989 m as on 30th September, 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 capex plans of Rs 1.25 bn 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 125, the company is trading at 31 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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