MOSL: HINDUSTAN MEDIA VENTURES (Neutral)-Muted earnings-growth outlook modest

HINDUSTAN MEDIA VENTURES: Muted earnings; growth outlook modest

(HMVL IN, Mkt Cap USD0.3b, CMP INR220, TP INR237, 8% Upside, Neutral)

• Dismal revenue growth: revenue declined 14% YoY (-12% QoQ) to INR2b (16% miss). Ad revenue fell 15% YoY to INR1.5b, primarily due to a high base (4QFY17 - due to UP elections). Circulation revenue was down 11% YoY to INR0.5b, mainly due to lower yields. Consol. EBITDA fell 54% YoY to INR264m (59% miss), with the margin down 11.1pp YoY to 13.1%. Yet, PAT fell by a meager 5% YoY (-18% QoQ) to INR403m (27% miss), aided by a 54% YoY jump in other income. For FY18, revenue/EBITDA declined 6%/12% to INR8.8b/INR1.8b (4%/18% miss), while PAT fell 8% to INR1.8b (8% miss).
• Concall highlights: (1) HMVL expects ad revenue to grow, led by higher spends by government (due to general elections), a revival in ad spends across sectors and monetization of IRS results. (2) Realization per copy rose sequentially in 4Q, and is expected to inch up in 1Q/2QFY19 too. 3) Higher newsprint costs are expected to impact EBITDA margin by at least 200bp.
• Modest growth outlook: HMVL hinted that local ad spends are seeing signs of revival. This, coupled with the upcoming general elections, should lead to 5% ad revenue growth in FY19. Circulation revenue, too, is expected to grow at 5-6%, led by yield improvement, partly offset by intense competition. We cut consol. revenue by 8%/12% for FY19/20E due to slow pick-up in ad spends (we expect revenue to grow at a muted 4% CAGR over FY18-20). Mounting pressure from higher newsprint prices leads us to cut FY19/20E EBITDA by 23%/26%. We expect EBITDA/PAT CAGR of 4%/5% over FY18-20.