HT Media Ltd – Initiating Coverage

About the Company – HT Media Ltd (‘HT Media’)

HT_MEDIA

HT Media is one of India’s leading media companies, with a presence in print, radio and digital platforms.

It prints English daily ‘Hindustan Times’, Hindi daily ‘Hindustan’ (through listed subsidiary Hindustan Media Ventures Ltd) and Business daily ‘Mint’.

It operates FM Radio Stations ‘Fever’ and ‘Radio Nasha’, and its digital platforms include web portals related to their print media properties, as well as job portal ‘Shine.com’ and mobile marketing and engagement solution provider ‘Digital Quotient’.

It also has in its portfolio, ‘Studymate’, an education initiative for tutorials, and a business management school ‘Bridge’.

 Operational Performance

Hindustan Times is the 2nd largest English daily by circulation in India, behind ‘The Times of India’ as per Audit Bureau of Circulation (Jan – Jun 2016) (‘ABC’) and by Readership, as per Indian Readership Survey 2014 (‘IRS’). In Delhi HT was the most read newspaper, while it was at No 2 in Mumbai

English Dailies

Hindustan is the 4th largest Hindi daily by circulation in India, as per ABC, and 2nd largest by readership, as per IRS. It was the leading Hindi newspaper by readership in the states of Bihar, Jharkhand and Uttarakhand, while in Uttar Pradesh and Delhi it was at No 2.

Hindi Dailies

HT Media’s FM Radio Station ‘Fever’ (contemporary hit Bollywood music) operates in Delhi, Mumbai, Bengaluru, Chennai and Kolkata, while their second station ‘Radio Nasha’ (retro music) was launched in April 2016 in Delhi and Mumbai.

HT Media also acquired 8 other FM Radio licences in Hyderabad and all major towns of Uttar Pradesh, in the FM Radio Phase III Auctions concluded in Feb 2016.

Financial Performance (Consolidated)

 

Fin - IS - Corrected

Revenue growth for HT Media Ltd in FY16 was driven by 8% growth in core segment of Print and Publishing (through 5.6% growth in circulation and 9% growth in advertising revenues), 18% growth in Radio and 35% growth in their Digital business.

Revenue growth in the first two quarters of FY17 was driven by the monsoon, 7th Pay Commission payouts and a productive festive season.

Growth faltered in Q3 due to demonetisation, leading to major firms in sectors such as automobile and real estate cutting ad spends, and stagnated revenues for HT Media in 9MFY17.

Print and Publishing constitutes the majority of revenues and operating profits for the firm.

Fin - Revenues

In the fiscal year FY17, HT Media as well as listed subsidiary Hindustan Media Ventures Ltd, transferred their digital assets to subsidiary ‘HT Digital Streams Ltd’, which now operates their digital news portals (reported under existing segment ‘Digital’) as well as generates platform agnostic content (now reported as a separate segment ‘Multimedia Content Management’)

Fin - BS - Corrected

Gearing for the firm on a consolidated basis almost doubled in FY16, due to the twin effects of acquisition of 10 frequencies in the FM Radio Phase III Auctions concluded in Feb 2016.

The management chose not to liquidate investments, but instead borrowed the entire bid amount with a mix of domestic and foreign funding, as the average cost of funds was lower than investment returns.

As the licences on books are intangible assets, their value further reduced TNW, leading to higher gearing. Net of current and non-current investments, HT Media Ltd remains a debt free company.

Most major players in the sector including HT Media, offer an ‘Ads for Equity’ model, where they subscribe to minority stake in customer’s businesses (or debt or charge on immovable property) in exchange for advertisement space. Thus, the firms have a large corpus of listed and unlisted investments on books at all times, contributing to other income.

Share Price Performance (BSE: 532662 | NSE: HTMEDIA)

1 Yr NSE
HT Media Ltd: 1 Year Share Price Graph (NSE)
2 Yr NSE
HT Media Ltd: 2 Year Share Price Graph (NSE)
5 Yr NSE
HT Media Ltd: 5 Year Share Price Graph (NSE)

Future Outlook

The management team of HT Media Ltd projects to continue to strengthen the position of their three established news brands ‘Hindustan Times’, ‘Hindustan’ and ‘Mint’, through a strong editorial focus and content.

HTML has also successfully set up a ‘Digital Newsroom’ allowing them to operate a single unified content management system across media channels, increasing efficiency and ease of access to data.

Cost optimization programs, which included closing four editions in the current fiscal, as well as three local bureaus, are expected to continue, towards improvement in margins.

Going forward, they plan to operationalise new FM Radio Licences acquired in Phase III auction, while improving the profitability of their digital operations.

Higher interest costs on debt availed for FM Radio Licences are expected to continue to subdue net margins for few quarters, mitigated by other income from investments.

Verdict: Buy on Dips

With HT Media’s publishing business is projected to grow steadily with the economic cycle and increase in literacy rates, and its major brands are well positioned in English and Hindi speaking geographies, providing a business moat.

Ancillary revenues from radio and digital mediums (though being at nascent stage) are expected to grow at a faster pace, and complement HT Media’s geographical reach in print, to offer a holistic solution to advertisers.

Hence, we recommend an accumulate on this scrip for the medium term.

About the Sector – Media and Entertainment (Print)

The Rs 30,300 Crs Indian Print media industry derives its revenues from Advertising and Circulation in the ratio 65-35; and is dominated by Newspapers over Magazines and Periodicals.

Industry Size

Readership for English newspapers is concentrated in urban centres, and commands higher advertising yields, as compared to Hindi and other vernacular readership in regional language papers.

Ad revenues and hence the health of the sector,  is linked to the economic cycle, and to the health of consumer facing sectors such as automobile, real estate, education, FMCG, finance, telecom and e-commerce, as well as Government ad-spends.

Major expenses include newsprint (~50% imported) the price of which has strengthened over the last few years, and is also linked to oil prices and the exchange rate.

Traditionally, the print media has grown through steadily rising literacy levels and demand for information, and favourable demographic movement toward urban centres, rise in affluence and disposable income.

Readership is also stable due to brand loyalty over an entire lifetime, if not across generations. However, this is challenged by increasing internet connectivity and penetration, and movement of news consumption to digital mediums. Thus, investment by major players has also been towards diversifying from traditional mediums to mobile applications and web portals.

Disclaimer

The author has a small (less than 1% of portfolio) long position in HT Media Ltd as on 28-04-2017.

Sources

  1. Sector Analysis via: The KPMG India – FICCI Media and Entertainment Report (M&E) 2017
  2. Share Price Graphs via: HDFC Securities
  3. Company Information and Financials via: HT Media Website – Investor Section
  4. Circulation Figures via: Audit Bureau of Circulation (Jan – Jun 2016)
  5. Readership Figures via: Indian Readership Survey 2014
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