Hold HT Media; target of Rs 108: Centrum Research

Centrum Research's research report on HT Media

We downgrade our rating to Hold rating on HT Media and revise our TP to Rs108 as we continue to value the company on our conservative Adj. OCF/EV yield based methodology. Stock has given 27% return since we upgraded the stock to buy in Jan’17. Ad growth continues to remain challenging with a 8% decline in Q2FY18 while we have modelled 3% decline for FY18E on hope of a sharp recovery in H2FY18. Further we believe the cost measures undertaken by the management in last one year has yielded results as other expenses were down 22% YoY and employee expenses were down 20% YoY.  We believe separate listing of HTDVL is unwarranted given the synergies with both HTML and HMVL.

Outlook

Downgrade to Hold: We have cut our revenue estimates by 7% each for FY18E and FY19E on lower ad revenues, while operating profit estimates have been increased by 13.5% and 14.7% for FY178E and FY19E respectively on the back of prudent cost management. PAT has been increased by 6.1% for FY18E and 4.6% for FY19E. We downgrade the stock to hold and revise our TP to Rs108 as we value the company on an adjusted OCF to EV yield based methodology, taking its account five year average cash flows. Key upside risk is stronger than expected ad growth while downside risk continues to be effective utilisation of cash.