Buy HT Media Ltd.
CMP Rs 148.00
Target Price 180
INVESTMENT RATIONALE
HT has its presence in print, radio and internet which garner 55% share of Indian advertisement pie of Rs 22,160 crores in CY08. In the print segment, the company is a major player in English category which accounts for 45% of Rs 10,800 crore print advertisement markets.
Other than english they are also into Hindi and business daily categories which together account for another 25% taking company presence in to 70% of print advertisement market. Hindustan, with 23 editions across the northern region and average readership base of 9.3 million copies, is the third largest Hindi daily in the country. Hindustan had fantastic run so far, growing from 8th position in 2004 to current 3rd. The newspaper has its presence in UP, Bihar, Jharkhand and Delhi which together account for 51% of Hindi advertisement pie, and is the market leader in Bihar & Jharkhand. To further strengthen its position in Hindi category, company has planned for a capex of Rs 40 crores to launch three more editions. We expect Hindustan to grow at a CAGR of 26% over next 2 years.
Key Developments
HT Media spins off Hindi businesses
HT Media board has approved the de-merger of its Hindi media business to its unlisted unit Hindustan Media Ventures Ltd. The move was effective from December 1, 09. HT Media is spinning off the Hindi-language Hindustan newspaper, Hindi magazines Nandan and Kadambini and their respective Internet portals. The de-merger also includes the assets, liabilities and staff, termed together as the Hindi Business Undertaking. The spin-off is as per the expected book value of the Hindi business as on November 30, for a lumpsum cash consideration of Rs 149 crore including a net working capital of Rs 24 crore,”. HT Media also owns the English daily The Hindustan Times and the financial newspaper Mint.
Valuations
During the quarter, company posted a marginal de-growth in english segment but saw advertisement volume revival from key sectors like Real estate and BFSI. However, we expect advertising spends and yields in english segment to pick up by Q1FY11, which would led company to post a 16.1% y-o-y to Rs 1,416.5 crore in FY11. Strong presence in key markets, diversified business model, potential to unlock value in Partnership Growth model and Hindustan (Hindi dailies) makes HT Media a clear winner in Indian Print industry. Thus, We recommend a “BUY” on the stock with 12-month target price of Rs 180 due to revival in english advertisement volumes, lower newsprint cost and potential for unlocking value in Hindustan, which representing a potential upside of 16%. At the CMP of Rs 150 per share, stock is trading at 18.3x its FY11E EPS of Rs 8.2.
Report card
| Attribute | Value | Date |
|---|---|---|
| PE ratio | 40.57 | 06/02/10 |
| EPS (Rs) | 3.64 | Mar, 09 |
| Sales (Rs crore) | 328.98 | Dec, 09 |
| Face Value (Rs) | 2 | |
| Net profit margin (%) | 6.30 | Mar, 09 |
| Last dividend (%) | 15 | 19/05/09 |
| Return on average equity | 9.45 | Mar, 09 |
Related posts: