MOSL: HT MEDIA (Neutral)-Sluggish ad market weighs on performance-Cost optimization measures boosts PAT

​HT Media: Sluggish ad market weighs on performance; Cost optimization measures boost PAT despite weak ad market

(HTML IN, Mkt Cap USD0.3b, CMP INR102, TP INR113, 11% Upside, Neutral)

• GST pain visible: Overall revenue declined 7% YoY on the back of weak ad and circulation revenues. Ad revenue fell 8% YoY to INR3.95b (2% miss), led by ~12% volumes decline (muted spends in government, education, FMCG and travel segments). English/Hindi ad revenues declined 8% YoY to INR2.3b/1.57b. English/Hindi circulation revenue remained sluggish (down 13%/7%) on the back of soft pricing and curtailing of copies.
  
• PAT doubled despite revenue slowdown: Bucking the revenue trend, EBITDA doubled to INR1045m in 2QFY18, led by a) restructuring benefits (hiving off low-yield regions), b) lower cost on account of a decline in volumes (~12%), c) cut down in discretionary spends and d) GST benefits. PAT increased 114% YoY to INR662m.
  
• Digital venture to be hived off: Digital ventures, including content creation and the news website, will be hived off into a separate listed company, and HT Media's shareholders will get shares in the entity. The entity will have 90% revenues from the group companies and will be loss-making, but will seek business outside the group companies over time. This will reduce HT Media's digital business losses.