Buy HT Media; target of Rs 110: Angel Broking

Angel Broking`s research report on HT Media

“For 4QFY2014, HT Media reported a modest 8.7percent yoy growth in its top-line to Rs544cr (slightly ahead of our estimates of Rs532cr), aided by strong growth in advertising revenues from Hindi editions. Overall, the company registered a 10.4percent yoy growth in advertising revenue to Rs417cr and 14.1percent yoy growth in circulation revenue to Rs66cr. On the operating front, the OPM contracted by 47bp yoy to 13.9percent while the net profit declined by 13.1percent yoy to Rs35cr (our expectation was of Rs45cr).”

 “Although HT Media’s Hindi subsidiary - HMVL registered a double digit advertising growth (20.3percent yoy to Rs133cr on back of increase in yields and volume), the English advertising revenue grew by only 6.4percent yoy to Rs284cr, primarily due to sluggish advertising growth in HT Media’s Delhi market. However, the Management expects English advertising yield to go up over FY2015, leading to improvement in English advertising revenues. On the operating front, print business reported 14.1percent yoy growth in EBIT to Rs78cr. The digital business continued to report an EBIT level loss to the tune of Rs7-8cr while the radio business reported an EBIT level profit of Rs5cr. Further, reversal of deferred tax asset (of Rs19cr related to HT Burda subsidiary) led to a 13.1percent yoy decline in net profit to Rs35cr.”

“At the current market price, HT Media is trading at attractive valuations of 8.9x FY2016E consolidated EPS of Rs10.3. Considering the expectation of improvement in English advertising yields and stable exchange rate, we maintain Buy on the stock with a target price of Rs110. Downside risks to our estimates include 1) a sharp rise in newsprint prices in INR terms, and 2) higher-than-expected losses/increase in the breakeven period of emerging editions and digital business,” says Angel Broking research report.

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