Buy Hindustan Media Ventures; target Rs 180: PINC Research

“Hindustan Media Ventures (HMVL)’s top-line grew 9% YoY to reach Rs1.4bn, below our expectations (PINCe Rs 1.5bn) wherein the Ad revenue grew at 8% YoY (sequential degrowth of 10%) to Rs1.02bn. Circulation revenue registered a healthy growth of 8%YoY (QoQ growth of 1.5%) to Rs338mn led by increased circulation copies and better realisation. Raw Material as a percentage of sales increased 193bps from 44.2% to 46.1%YoY because higher newsprint cost. OPM declined from 14.1% in Q3FY11 to 11.7% in Q3FY12. Resultant PAT declined to Rs108mn (7% de-growth YoY).”

“The company reported Ad revenue (72% of total revenue) growth of 8% YoY to Rs1.02bn. Circulation revenue grew by 1.5% sequentially (8% YoY) to Rs338mn due to higher circulation and improved realisation. Raw material cost increased 13% YoY to Rs656mn with raw material as a percentage of sales increasing to 46.1% from 44.2% in Q3FY11 mainly due to increase in newsprint prices and higher consumption of newsprint. Other expenses were higher 22% YoY to Rs371mn due to increase in scale of operations and a one-time provision of Rs25mn for diminution in value of investment. EBITDA increased 4% YoY to Rs166mn delivering an OPM of 11.7%, 239bps lower than Q2FY11. Resultant PAT contracted 7% YoY to Rs108mn.”

“We believe, HMVL being the fastest-growing Hindi news daily, is well entrenched to deliver revenue CAGR of 13% and PAT CAGR of 24% over FY11-FY13E. We expect the expansion in UP(the largest print market) to yield better monetisation in the coming quarters. At the CMP, the stock trades at 11xFY13E EPS. We reiterate our ‘BUY’ recommendation on the stock with a target price of Rs 180 (16xFY13E EPS),” says PINC Research report.

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