30 October, 2008

HT Media

Current market price: Rs 73

Target price: 99

Upside: 35.6%

Brokerage: Angel Broking

HT Media (HTML) reported a modest topline growth of 17.7 per cent y-o-y to Rs 331 crore during Q2 FY09, which was aided by 10 per cent value growth and 8 per cent volume growth in advertisement revenues. EBITDA margins witnessed sharp contraction of 629 basis points on account of 405 basis points increase in raw material prices and 257 basis points increase in advertising and sales promotion expenses.

HTML’s earnings for the quarter witnessed a steep slump of 49 per cent y-o-y to Rs 16.3 crore largely owing to sharp margin contraction, 1,123 basis points jump in tax rate (due to low base) and 64 per cent increase in interest cost due to higher debt on the books (to the tune of Rs 300 crore) raised to fund expansion in existing and new businesses. The company’s two new printing facilities at Meerut and Allahabad are expected to commence operations in Q3 FY09.

Over FY08-10E, HTML is expected to post CAGR of 15.9 per cent in revenues. However, margin pressures on account of weakening rupee (leading to higher imported newsprint costs), higher selling, general and administration expenses, and possible slowdown in ad revenues will result in earnings CAGR of mere 3.3 per cent over FY08-10E. At Rs 82, the stock is trading at 12.4x FY10E earnings. Maintain buy, with a revised target price of Rs 99 (Rs 140 earlier).