Hold HT Media; target of Rs 100: ICICI Direct


ICICI Direct’s research report on HT Media

Revenues were at Rs 560.6 crore (decline of 6.9% YoY), below our estimate of Rs 599.1 crore. Hindi ad revenues came in at Rs 157 crore, with 7.7% YoY decline vs. our estimate of ~4% YoY growth. English print revenues were down 8.4% YoY to Rs 238 crore (our estimate: 5% decline). Nevertheless, the company posted a healthy performance in the radio segment with 18.4% YoY growth to Rs 42.8 crore as the newly launched stations continued to boost revenues Given the focus on cost savings, it reported EBITDA margins of 18.6% vs. our estimate of 13.4%. On the costs front, savings in administrative and other expenses aided the EBITDA beat PAT came in higher at Rs 66.2 crore (vs. expectation of Rs 39.4 crore), given the beat at the operating level, also aided by lower than expected tax rate.

Outlook

We incorporate the benefits of effective cost control in our estimates. However, we await further details to account for the company’s proposed demerger of the digital business (refer page 5). We also highlight that the lack of clarity over cash deployment either through acquisition/dividend, etc, despite its robust net cash (~Rs 1205 crore), remains a cause for concern. We note that the management justification of holding cash to provide for any potential acquisition opportunities that may be available in the course of business is also unconvincing. In addition, ad growth in the English segment continues to be elusive. We assign a HOLD rating to the company valuing it at 10x FY19E EPS of Rs 10, with a revised target price of Rs 100. We acknowledge that the company’s steep cost savings amid difficult times would protect earnings. However, any multiple re-rating can only happen after there is clarity on the cash allocation or if there is a marked improvement in English print that is not visible as of now.

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