Hold HT Media; target of Rs107: Emkay

Emkay Global Financial Services has recommended hold rating on HT Media with a target of Rs 107 in its October 15, 2012 research report. The research firm says tough macro economic environment and lower ad spends have impacted HT Media’s ad growth in H1FY13, especially in English segment. Expect English ad rev. has been bottomed out in Q2FY13.

“HT Media, higher than expected decline in ad revenue was offset by robust growth in Job work revenue, radio sales and circulation revenue. Print ad revenue declined 1.4% yoy, English ad declined 2.8% yoy while Hindi ad grew 1.7% yoy. Circulation rev. grew 11% yoy to Rs563mn, driven by increase in circulation & cover price hike. EBITDA declined 20% yoy with EBITDA margin of 11.1% declining 330bps yoy and 259bps qoq. Employee expense and raw material cost increased 22% and 8% yoy. Wage hikes and bonus payout in Q2FY13 led to higher employee cost. Higher newsprint consumption and high cost newsprint inventory impacted raw material cost. Weak operational performance led to PAT decline of 24% yoy to Rs333mn.”

“Revenue grew 4.2% yoy to Rs1.6bn with ad rev. growth of 1.7% yoy. High base of Q2FY12 and shift of festive season to Q3FY13 impacted ad growth. Circulation rev. grew 16% yoy to Rs387mn, led by increase in copies and higher realization/copy. EBITDA margin at 18% declined 238bps yoy while it improved 166bps, led by cost rationalization measures.  Radio segment revenue grew 26.6% yoy to 199mn with EBIT margin of Rs23mn v/s loss of Rs45mn in Q2FY12. Re-structuring in Radio business has started to show +ve results. Digital business reported revenue of Rs133mn (+33% yoy) with EBIT loss of Rs99mn. HT Burda JV revenue stood at Rs210m v/s Rs250mn in Q1FY13.”

“Tough macro economic environment and lower ad spends have impacted HT Media’s ad growth in H1FY13, especially in English segment. We believe English ad rev. has been bottomed out in Q2FY13 and we project growth from hereon. Our estimates already discount 8% English ad growth for FY14E. However, upgrades in the earnings and rerating of the stock can happen only if there is major turnaround in the macro economic situation. Due to cost escalations we have revised our EPS estimates downward by 8.5%8% for FY13E/14E to Rs7.4/8.9. Maintain hold with target price of Rs107,” says Emkay Global Financial Services research report.

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