Accumulate HT Media; target of Rs 128: KRChoksey

KRChoksey is bullish on HT Media and has recommended accumulate rating on the stock with a target of Rs 128 in its May 22, 2012 research report.

“HT Media Ltd’s Q4FY12 numbers disappointed us on all the parameters. Net sales stood at Rs 494crs, degrowth of 6% QoQ as advertising revenue shrank due to softening ad market led by macroeconomic concerns. EBITDA for the quarter was Rs 48crs, a sharp decline of 38% over sequential quarter as operating expenses increased. The company reported net profit of Rs 22crs, down by 54% QoQ due to increase in depreciation and finance cost. Net profit margin eroded by 460bps to 4.5%. Major segments of advertising pie are showing signs of sluggishness. Hindi belt showed marginal improvement as retail advertising has not taken a hit as national advertising. We believe FY13E to be another challenging year for HT Media and ad revenue would be muted. Higher inventory cost and interest burden will be spoilsports in terms of margins.”

“HT Media reported advertising revenue growth of 3% QoQ to Rs 373.6crs driven by 10% QoQ growth in Hindi space while English segment showed degrowth of 14% over Q3FY12. Circulation revenue grew by 3% to Rs 48.3crs driven by increase in circulation. We expect ad revenue to witness pressure in FY13E due to slowdown in major sectors of ad pie like real estate, retail, consumer durables etc. The company reported operating margin of 9.7% for Q4FY12, lower by 510bps QoQ on account of higher newsprint cost and other operating expenses. HT Burda showed healthy improvement of 14% QoQ to revenues at Rs 25.8crs however EBITDA losses increased from -0.17mn to Rs 3.6crs. Newsprint prices to remain a concern as rupee depreciates. Losses from digital businesses would drag operating margins further. Increase in depreciation due to new launches and higher interest outgo will adversely impact on net profitability.”

“Macroeconomic concerns have led to slowdown in advertising spend causing ad revenue hit for HT Media. Depreciating rupee would be another matter of concern as it would increase raw material cost putting pressure on operating margins. We have revised our estimates considering slowdown in advertising spends in English segment. At current price, the stock is trading at 13.4x PE to FY13E earnings. We downgrade to ‘ACCUMULATE’ with a target price of Rs 128 by assigning 15x PE to FY13E eps of Rs 8.5,” says KRChoksey research report.    

Public holding more than 90% in Indian cos

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