3QFY13 Result Update Media February 13, 13 HT Media Performance Highlights Quarterly Data (Consolidated) (` cr) 3QFY13 3QFY12 % yoy 2QFY13 %qoq Revenue 547 524 4.4 511 7.1 EBITDA 87 78 12.0 57 54.8 OPM (%) 16.0 14.9 9bp 11.1 492bp Recurring PAT 54 48 11.4 33 61.1 For 3QFY13, HT Media reported a subdued 4.4% yoy growth in its topline to `547cr. Its OPM expanded by 9bp yoy to 16% aided by 134bp yoy decline in consumption of raw materials as a percentage of sales (driven by pagination efficiency, cutback in excess circulation in few markets and lower job work). Consequently, the company s profit grew by a healthy 11.4% yoy to `54cr. Key highlights for the quarter: Advertising revenue registered a sluggish growth of 2% yoy to `415cr, primarily driven by volume growth. Although the decline in advertising revenue in Delhi continued (real estate, education and BFSI sector continue to be laggards in ad spend), HT Media s hindi print business subsidiary, HMVL s ad revenue grew by 15% yoy (aided by strong growth in local ad revenues in UP, Bihar and Jharkhand on back of festive season). The circulation revenue grew by 12.3% yoy to `56.5cr driven by combination of higher circulation and higher realization per copy. In terms of other segments, the radio segment contributed `22cr, HT Burda contributed `29cr while the digital business contributed `14cr to the topline. Outlook and valuation: At the current market price, HT Media is trading at 13.0x FY14E consolidated EPS of `7.8. We recommend Accumulate on the stock with a target price of `113, based on 14.4x FY14E EPS. Downside risks to our estimates include 1) a sharp rise in newsprint prices in INR terms, and 2) higherthanexpected losses/increase in the breakeven period of emerging editions and digital business. Key financials (Consolidated) Y/E March (` cr) FY11 FY12 FY13E FY14E Net Sales 1,776 2,003 2,061 2,5 % chg 25.7 12.8 2.9 7.0 Net Profit (Adj.) 181 165 156 184 % chg 31.1 (8.6) (5.7) 18.1 EBITDA margin (%) 18.7 14.3 14.0 15.1 EPS (`) 7.7 7.0 6.6 7.8 P/E (x) 13.2 14.5 15.4 13.0 P/BV (x) 1.8 1.7 1.5 1.4 RoE (%) 15.9 12.0.3 11.0 RoCE (%) 15.8.8.0 11.0 EV/Sales (x) 1.1 1.0 0.9 0.8 EV/EBITDA (x) 5.8 7.6 6.7 5.5 ACCUMULATE CMP `2 Target Price `113 Investment Period 12 months Stock Info Sector Media Market Cap (` cr) 2,391 Net Debt (` cr) (643) Beta 0.6 52 Week High / Low 150/82 Avg. Daily Volume 59,576 Face Value (`) 2 BSE Sensex 19,608 Nifty 5,933 Reuters Code HTML.BO Bloomberg Code HTML@IN Shareholding Pattern (%) Promoters 68.8 MF / Banks / Indian Fls 7.3 FII / NRIs / OCBs 13.4 Indian Public / Others.5 Abs. (%) 3m 1yr 3yr Sensex 5.3.3 21.4 HTML 5.2 (30.3) (29.4) Amit Patil 02239357800 Ext: 6839 amit.patil@angelbroking.com Please refer to important disclosures at the end of this report 1
Exhibit 1: Quarterly performance (Consolidated) Y/E March (` cr) 3QFY13 3QFY12 % yoy 2QFY12 % qoq 9MFY13 9MFY12 % chg Net Sales 547 524 4.4 511 7.1 1,548 1,508 2.7 Consumption of RM 187 186 0.4 195 (4.3) 559 541 3.4 (% of Sales) 34.1 35.4 38.2 36.1 35.9 Staff Costs 98 94 4.9 3 (5.2) 293 266.0 (% of Sales) 17.9 17.8.2 18.9 17.7 Other Expenses 175 167 4.9 156 12.2 484 462 4.8 (% of Sales) 32.0 31.8 30.5 31.3 30.7 Total Expenditure 460 446 3.0 454 1.2 1,337 1,269 5.3 Operating Profit 87 78 12.0 57 54.8 211 238 (11.5) OPM 16.0 14.9 11.1 13.6 15.8 Interest 11 11 3.3 11.8 31 26.1 Depreciation 22 22 0.0 24 (9.1) 68 67 2.4 Other Income 24 19 27.3 24 (2.3) 69 58 19.9 PBT (excl. Ext Items) 78 64 22.0 47 67.0 181 3 (11.2) Ext Income/(Expense) 0 0 0 0 0 PBT (incl. Ext Items) 78 64 22.0 47 67.0 181 3 (11.2) (% of Sales) 14.3 12.2 9.2 11.7 13.5 Provision for Taxation 22 16 37.3 11 7.3 46 54 (16.1) (% of PBT) 28.2 25.1 22.7 25.2 26.7 Recurring PAT 56 48 16.9 36 55.1 135 149 (9.4) PATM 9 7 9 Minority Interest 3 (0) 3 7 5 Reported PAT 54 48 11.4 33 61.1 128 144 (11.1) Equity shares (cr) 24 24 24 24 24 EPS (`) 2.3 2.1 11.4 1.4 61.1 5.4 6.1 (11.1) February 13, 13 2
Subdued topline growth For 3QFY13, HT Media reported a subdued 4.4% yoy growth in its topline to `547cr. Although the decline in advertising revenue in Delhi continued (real estate, education and BFSI sector continue to be laggards in ad spend), HT Media s hindi print business subsidiary, HMVL s ad revenue grew by 15% yoy (aided by strong growth in local ad revenues in UP, Bihar and Jharkhand on back of festive season). Exhibit 2: Subdued topline growth (` cr) 560 540 5 29 500 480 25 23 13 460 13 6 4 4 440 1 4 462 467 495 489 524 493 490 511 547 400 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 Consolidated Topline yoy growth (RHS) 35 30 25 15 5 0 5 (%) Exhibit 3: Circulation revenue up by 12.3% Exhibit 4: Volume driven ad revenue growth (` cr) 60 50 40 30 21 9 12 11 8 4 3 (2) 7 47 47 49 51 50 48 53 56 57 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 25 15 5 (5) (%) (` cr) 500 400 300 0 0 27 17 12 (1) 2 (3) 369 362 384 369 407 374 3 373 364 415 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 30 25 15 5 (5) (%) Circ. revenue (LHS) yoy growth (RHS) Ad revenue (LHS) yoy growth (RHS) The circulation revenue grew by 12.3% yoy to `56.5cr driven by combination of higher circulation and higher realization per copy. In terms of other segments, the radio segment contributed `22cr, HT Burda contributed `29cr while the digital business contributed `14cr to the topline. February 13, 13 3
OPM expands 9bp yoy The company s OPM expanded by 9bp yoy to 16% aided by 134bp yoy decline in consumption of raw materials as a percentage of sales (driven by pagination efficiency, cutback in excess circulation in few markets and lower job work). Consequently, profit grew by a healthy 11.4% yoy to `54cr. Exhibit 5: OPM expands by 9bp... Exhibit 6:...boosting profitability 70.0 64.3 64.7 65.1 62.7 64.6 63.0 63.7 61.8 65.9 50 14 (%) 60.0 50.0 40.0 30.0.0.0 18.8 18.1 18.2 14.4 14.9 9.8 13.6 11.1 16.0 (` cr) 40 30 11 11 11 9 9 7 5 48 53 51 44 48 22 41 33 54 12 8 6 4 2 (%) 3Q11 4Q11 1Q12 2Q12 OPM 3Q12 4Q12 1Q13 Gross margins 2Q13 3Q13 3Q11 4Q11 1Q12 2Q12 3Q12 Recurring PAT (LHS) 4Q12 1Q13 2Q13 NPM (RHS) 3Q13 Investment rationale Margin pressure to ease as ad revenue picks up: HT Media s recent underperformance can be attributed to OPM pressure on account of losses in digital business and emerging markets, higher newsprint costs and cyclical nature of ad revenue growth (sluggish due to slower GDP growth). We expect ad revenue to bounce back as economic activity picks up. New businesses continue to grow: In terms of other segments, HT Media s digital businesses continued with its growth momentum during the quarter (18.2% yoy rise in digital segment revenue in 3QFY13). The company s job portal, Shine, has more than ~5.2mn engaged candidates and is expected to achieve a positive EBITDA in the current year. HT Campus became EBITDA positive in 1QFY13. The radio segment also registered a strong growth of 25.6% yoy to `22cr while HT Burda grew by 28.3% yoy to `29cr. We expect these segments to continue to post robust revenues. Going forward, we believe reduction in losses of emerging editions and stabilization of newsprint costs in INR terms will help HT Media to improve its margin to ~15% in FY14. Outlook and valuation At the current market price, HT Media is trading at 13.0x FY14E consolidated EPS of `7.8. We recommend Accumulate on the stock with a target price of `113, based on 14.4x FY14E EPS. Downside risks to our estimates include 1) a sharp rise in newsprint prices in INR terms, and 2) higherthanexpected losses/increase in the breakeven period of emerging editions and digital business. February 13, 13 4
HT Media 3QFY13 Result Update Exhibit 7: Peer valuation Company Reco Mcap (` cr) HT Media Jagran DB Corp Accum. Buy Accum 2,391 3,270 4,362 CMP TP Upside P/E (x) EV/Sales (x) (`) (`) (%) FY13E FY14E FY13E FY14E 2 113 11 15.3 13.0 0.8 0.7 3 125 21 16.1 14.2 2.3 2.0 238 2666 12.1 16.4 2.6 2.2, Note:^ denotes consensus data, # denotes CAGR for FY1214E RoE (%) CAGR FY13E FY14E Sales PAT.3 11.0 4.9 5.6 25.9 26.6 11.9 13.8 21.4 22.4 11.0 14.8 Exhibit 8: Angel vs. consensus estimatess Topline (` cr) FY13E FY14E EPS (`) FY13E FY14E Angel estimates 2,061 2,5 Angel estimatess 6.6 7.8 Consensus 2,069 2,270 Consensus 7.0 8.4 Diff (%) (0.4) (2.9) Diff (%) (5.7) (7.1) Exhibit 9: Return of HT Media vs. Sensex Exhibit : Oneyear forward P/E band 0% 180% 160% 140% 1% 0% 80% 60% 40% % 0% Apr Jun Aug Oct Dec Sensex Feb11 Apr11 Jun11 Aug11 Oct11 HTMedia Dec11 Feb12 Apr12 Jun12 Aug12 Oct12 Dec12 Share Price (`) 180 160 140 1 0 80 60 40 0 Oct Dec Feb11 9x Apr11 Jun11 Aug11 13x 17x Oct11 Dec11 Feb12 Apr12 Jun12 Aug12 21x Oct12 Dec12 Source: Company, Angel research Source: Company, Angel research Company Background HT Media is the second largest print media company in terms of readership/ /circulation and the largest listed print media company in terms of revenue. The company's two key offerings, Hindustan Times and Hindustan, feature in the top five newspaperss in their respective categories in terms of readership. The company is a market leader in Delhi (Hindustan Times), Bihar and Jharkhand (Hindustan) and has emerged as a strong contender in the financial daily segment (Mint). February 13, 13 5
Profit and Loss Statement (Consolidated) Y/E March (` cr) FY09 FY FY11 FY12 FY13E FY14E Gross sales 1,347 1,413 1,776 2,003 2,061 2,5 Less: Excise duty Net Sales 1,347 1,413 1,776 2,003 2,061 2,5 Total operating income 1,347 1,413 1,776 2,003 2,061 2,5 % chg 11.9 4.9 25.7 12.8 2.9 7.0 Total Expenditure 1,259 1,163 1,444 1,716 1,773 1,872 Cost of Materials 595 515 666 781 822 880 Personnel 242 252 301 356 381 397 Others (include SG&A) 422 396 477 579 569 595 EBITDA 88 250 332 287 288 333 % chg (48.3) 184.4 32.9 (13.6) 0.4 15.5 (% of Net Sales) 6.5 17.7 18.7 14.3 14.0 15.1 Depreciation& Amortization 69 71 84 92 94 4 EBIT 19 179 248 195 194 228 % chg (83.1) 839.6 38.3 (21.2) (0.5) 17.4 (% of Net Sales) 1.4 12.7 14.0 9.8 9.4.3 Interest & other Charges 32 30 25 36 33 27 Other Income 33 41 34 75 70 70 (% of PBT) 166.6 21.5 13.2 32.1 30.1 25.7 Share in profit of Associates Recurring PBT 191 257 234 231 271 % chg (85.7) 860.7 35.0 (9.0) (1.2) 17.0 Pr Period & Extraordinary Exp/(Inc.) 19 2 PBT (reported) 1 188 257 234 231 271 Tax 12 54 71 63 69 81 (% of PBT) 62.9 28.2 27.7 26.7 30.0 30.0 PAT (reported) (12) 135 186 172 162 189 Add: Share of earnings of assoc. Less: Minority interest (MI) (13) (1) 5 6 6 5 PAT after MI (reported) 1 136 181 165 156 184 ADJ. PAT 138 181 165 156 184 % chg (80.3) 589.8 31.1 (8.6) (5.7) 18.1 (% of Net Sales) 1.5 9.8.2 8.3 7.6 8.4 Basic EPS (`) 0.9 5.9 7.7 7.0 6.6 7.8 Fully Diluted EPS (`) 0.9 5.9 7.7 7.0 6.6 7.8 % chg (80.3) 589.8 31.1 (8.6) (5.7) 18.1 Note: Some of the figures from FY11 onwards are reclassified; hence not comparable with previous year numbers February 13, 13 6
Balance Sheet (Consolidated) Y/E March (` cr) FY09 FY FY11 FY12 FY13E FY14E SOURCES OF FUNDS Equity Share Capital 47 47 47 47 47 47 Preference Capital 0 Reserves& Surplus 802 924 1,255 1,400 1,544 1,716 Shareholders Funds 849 971 1,302 1,447 1,591 1,763 Minority Interest (7) 22 130 136 142 147 Total Loans 371 402 297 346 297 247 Deferred Tax Liability 21 18 (9) (35) (22) (22) Other long term liabilities 2 2 2 2 Long term provisions 3 4 4 4 Total Liabilities 1,233 1,413 1,726 1,901 2,014 2,141 APPLICATION OF FUNDS Gross Block 823 1,033 1,213 1,284 1,338 1,450 Less: Acc. Depreciation 247 322 408 497 591 695 Net Block 576 712 805 787 747 755 Capital WorkinProgress 196 129 19 27 35 Net Block (incl WIP) 772 841 815 806 774 790 Goodwill Investments 304 475 759 832 870 890 Longterm loans and adv. 60 62 79 85 Current Assets 698 671 757 866 1,076 1,188 Cash 71 9 9 157 223 275 Loans & Advances 232 0 185 189 234 250 Other 396 362 464 5 619 662 Current liabilities 540 576 614 626 729 748 Net Current Assets 158 95 144 239 347 439 Mis. Exp. not written off 2 7 23 22 22 Total Assets 1,233 1,413 1,726 1,901 2,014 2,141 Note: Some of the figures from FY11 onwards are reclassified; hence not comparable with previous year numbers February 13, 13 7
Cashflow (Consolidated) Y/E March (` cr) FY09 FY FY11 FY12 FY13E FY14E Profit before tax 1 188 257 234 231 271 Depreciation 69 71 84 92 94 4 Change in WC 132 66 (46) (32) (65) (40) Interest / Dividend (Net) 12 15 (7) (28) (30) (35) Direct taxes paid 41 52 115 69 81 Others 6 (6) 0 0 36 0 Cash Flow from Operations 199 293 237 151 197 219 (Inc.)/ Dec. in Fixed Assets (259) (144) (77) (76) (62) (1) (Inc.)/ Dec. in Investments (82) (133) (240) (9) (38) () Cash Flow from Investing (341) (277) (318) (185) (0) (140) Issue of Equity 0 (2) 185 0 0 0 Inc./(Dec.) in loans 148 31 (88) 65 (49) (50) Dividend Paid (Incl. Tax) 11 8 11 12 12 Interest / Dividend (Net) 2 (1) 7 (29) (30) (35) Cash Flow from Financing 135 22 81 83 (31) (27) Inc./(Dec.) in Cash (7) 38 0 49 66 52 Opening Cash balances 77 71 9 9 157 223 Closing Cash balances 71 9 9 157 223 275 Note: Some of the figures from FY11 onwards are reclassified; hence not comparable with previous year numbers February 13, 13 8
Key ratios Y/E March FY09 FY FY11 FY12 FY13E FY14E Valuation Ratio (x) P/E (on FDEPS) 119.4 17.4 13.2 14.5 15.4 13.0 P/CEPS 26.9 11.5 9.0 9.3 9.6 8.3 P/BV 2.8 2.5 1.8 1.7 1.5 1.4 Dividend yield (%) 0.3 0.4 0.4 0.4 0.4 0.4 EV/Sales 2.0 1.9 1.1 1.0 0.9 0.8 EV/EBITDA 30.7.8 5.8 7.2 6.7 5.5 EV / Total Assets 2.2 1.9 1.1 1.1 1.0 0.9 Per Share Data (`) EPS (Basic) 0.9 5.9 7.7 7.0 6.6 7.8 EPS (fully diluted) 0.9 5.9 7.7 7.0 6.6 7.8 Cash EPS 3.8 8.9 11.3.9.6 12.3 DPS 0.3 0.4 0.4 0.4 0.4 0.4 Book Value 36.2 41.3 55.4 61.6 67.7 75.0 DuPont analysis EBIT margin 1.4 12.7 14.0 9.8 9.4.3 Tax retention ratio 0.4 0.7 0.7 0.7 0.7 0.7 Asset turnover (x) 1.7 1.7 2.1 2.3 2.3 2.3 ROIC (Posttax) 0.9 15.3 21.3 16.2 14.9 16.9 Cost of Debt (Posttax) 0.0 0.1 0.1 0.1 0.1 0.1 Leverage (x) (0.1) (0.1) (0.3) (0.4) (0.5) (0.5) Operating ROE 0.8 13.8 14.6 9.1 7.9 8.3 Returns (%) RoCE 1.6 13.5 15.8.8.0 11.0 Angel RoIC (Pretax) 0.8 15.5 21.0 15.8 14.8 16.4 RoE 2.4 15.2 15.9 12.0.3 11.0 Turnover ratios (x) Asset Turnover 1.6 1.4 1.5 1.6 1.5 1.5 Inventory / Sales (days) 48 31 30 33 35 35 Receivables (days) 60 63 53 50 61 61 Payables (days) 142 142 117 1 124 119 Net WC (days) 24 (4) 7 14 21 26 Solvency ratios (x) Net Debt to equity (0.0) (0.2) (0.4) (0.4) (0.5) (0.5) Net Debt to EBITDA (0.0) (0.7) (1.7) (2.2) (2.8) (2.8) Interest Coverage 0.6 6.1.0 5.4 5.9 8.4 Note: Some of the figures from FY11 onwards are reclassified; hence not comparable with previous year numbers February 13, 13 9
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