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HT Media: Slowing economy hampers growth - Views on News from Equitymaster

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HT Media: Slowing economy hampers growth

Nov 14, 2011

HT Media announced the second quarter results of financial year 2011-2012.The company has reported a 10.7% YoY and 12.9% YoY increase in top line and net profits respectively. Here is our analysis of the results.

Performance summary
  • Top line increased by 10.7% YoY on back of healthy growth in advertising. For the half year period, top line grew by 16.4%.
  • Operating margins declined by 3.3% YoY during the quarter and by 2.5% during the 6 months.
  • Net profits grew by 12.9% YoY during the quarter and 18.8% during the half year.

Financial performance snapshot
(Rs m) 2QFY11 2QFY12 Change 1HFY11 1HFY12 Change
Net sales 4,455 4,931 10.7% 8,506 9,901 16.4%
Expenditure 3,664 4,218 15.1% 6,908 8,286 19.9%
Operating profit (EBDITA) 791 713 -9.9% 1,598 1,615 1.1%
EBDITA margin (%) 17.8% 14.5%   18.8% 16.3%  
Other income 61 204 234.4% 111 350 215.3%
Interest 55 75 36.4% 119 127 6.7%
Depreciation & amortisation 211 233 10.4% 405 446 10.1%
Profit before tax 586 609 3.9% 1,185 1,392 17.5%
Profit before tax margin (%) 13.2% 12.4%   13.9% 14.1%  
Exceptional items - -   - -  
Tax 165 140 -15.2% 363 384 5.8%
Profit after tax before moinority 421 469 11.4% 822 1,008 22.6%
Share of minority 33 31   20 55  
Profit after tax 388 438 12.9% 802 953 18.8%
Net profit margin (%) 8.7% 8.9%   9.4% 9.6%  
No. of shares (m)         235.0  
Diluted earnings per share (Rs)*         8.4  
P/E (x)         16.9  
* On a trailing 12-months basis

What has driven performance in 2QFY12?
  • Topline rose by 10.7% led by 13% YoY growth in advertising and 21% growth in circulation. Revenues from the other business of radio and entertainment increased to Rs 157 m thereby registering a growth of 12% YoY.

  • On the cost front, raw material costs were up by 13% YoY and other expenditure by 32% . Forex losses comprised 5% of the growth in other expenses. Thus, total expenditure rose by 15% during the quarter and by 20% during the half year period.

    Cost breakup
    (% of sales) 2QFY11 2QFY12 Change 1HFY11 1HFY12 Change
    Raw materials consumed 1,649 1,861 12.9% 2,952 3,586 21.5%
    % sales 37.0% 37.7%   34.7% 36.2%  
    Staff cost 734 849 15.7% 1,484 1,729 16.5%
    % sales 16.5% 17.2%   17.4% 17.5%  
    Advertising cost 322 242 -24.8% 608 573 -5.8%
    % sales 7.2% 4.9%   7.1% 5.8%  
    Other expenses 959 1,266 32.0% 1,864 2,398 28.6%
    % sales 21.5% 25.7%   21.9% 24.2%  
    Total expenditure 3,664 4,218   6,908 8,286  

  • Raw material costs as a percentage of sales remained steady at 37%, but advertising costs declined to 5% of sales as against 7.2% previously. There was an increase in staff costs and other expenditure as a proportion of sales. The operating profits resultantly fell by nearly 10% and the operating margins shrunk to 3.3%.

  • The readership for the English daily 'Hindustan times' grew 1.2% QoQ and it maintained its top position in Delhi. Mint, the English business daily enjoys a readership of 28% in Delhi, Mumbai, Bengaluru and Kolkata and Chennai.

  • The media company was able to report net profit growth of 12.9% during the quarter despite a fall in operating profits. This was due to a sharp jump in other income of 235%.

What to expect?
At the current price of Rs 142, the stock of HT Media is trading at a multiple of 16.9 times its trailing 12-months earnings. Due to reduced advertising expenditure by companies, HT Media's revenues have been hurt. In such times of uncertainty revenue from other businesses form a crucial part of the revenue mix. The digital business and radio business have been doing well for the media company. The mainstream print business is also witnessing increasing readership numbers. We shall soon review our estimates for the stock.

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