Motilal Oswal neutral on HT Media

Motilal Oswal has maintained neutral rating on HT Media with a target of Rs 105 in its October 15, 2012 research report.

“HT Media is a leading Indian print media company, with a readership base of ~16m and average daily circulation of 4.1m. Hindustan Times (English daily) and Hindustan (Hindi daily) are leading brands, ranked 2nd and 3rd respectively on a pan-India basis in their respective genres. 'Mint' is the second most read business daily in India. HT Media's radio business is concentrated in the four metros. Its online portfolio is focused on news, networking, jobs and education, and is incurring operating loss.”

“HT Media's 2QFY13 PAT declined 24% YoY to INR333m (v/s our estimate of INR403m). Revenue grew 4% YoY/QoQ to INR5.1b (3% higher than our estimate), mainly driven by higher job work revenue. Ad revenue for the English as well as Hindi segments was broadly in-line. Ad revenue declined ~2% YoY/QoQ to INR3.64b (3% YoY decline in English; 1% YoY increase in Hindi), while circulation revenue grew 11% YoY to INR563m (1% in English; 16% in Hindi). EBITDA declined 21% YoY to INR565m (16% below our estimate), primarily led by higher than expected cost increase (+7% QoQ). Most of the EBITDA shortfall v/s our estimate was due to higher employee cost.  The increase in raw material (RM) cost was largely driven by higher job work operations while the increase in employee cost was on account of lower base in 1QFY13 due to certain incentive write-backs.  While there are incremental positives like improved performance in HT Delhi (~3% YoY decline in ad revenue v/s ~10% YoY decline in 1QFY13), INR appreciation v/s USD, and lower newsprint prices, the advertising outlook remains challenging.  In terms of verticals, the government, classified and real estate segments have picked up while banking/ auto/education remain sluggish.”

“Revenue increased 4% YoY/QoQ to INR5.1b (3% above our estimate of INR5b).  EBITDA declined 21% YoY to INR565m (v/s our estimate of INR674m) primarily due to lower ad revenue growth. EBITDA margin declined 339bp YoY to 11.1%. Raw material cost as a percentage of revenue increased ~190bp QoQ to 38.2% due to higher job work. Other income increased 20% YoY to INR242m (v/s our estimate of INR185m). Interest and finance charges were INR98m. Reported PAT declined 24% YoY to INR333m (17% below our estimate). We are downgrading our EBITDA estimate for FY13 by 5%, given the 2QFY13 shortfall but retain our PAT estimate on higher other income. Our FY14 estimates are largely unchanged. The stock trades at 15.1x FY13E and 12.9x FY14E EPS. Maintain neutral, with a revised target price of INR105 (14x FY14E EPS),” says Motilal Oswal research report.

Non-Institutions holding more than 90% in Indian cos

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