MOSL: HT MEDIA (Neutral)- Dismal quarter, outlook weak

HT Media: Dismal quarter, outlook weak

(HTML IN, Mkt Cap USD0.2b, CMP INR55, TP INR59, 7% Upside, Neutral)

• Weak revenue dents EBITDA: revenue fell sharply by 7% YoY to INR5.4b (13% miss), mainly due to a 7% YoY drop in print ad revenue to INR3.9b (DB Corp: +5% YoY). Further, a 3% YoY decline in circulation revenue to INR0.7b aggravated the impact on revenue. Subsequently, consol. EBITDA plunged 50% YoY to INR360m (54% miss). While RM cost rose 14% YoY, it was more than offset by savings in employee/SGA cost (down 21%/4% YoY). EBITDA margin contracted 540bp YoY to 6.6%. Consol. PAT stood at a meager INR12m (INR386m in 1QFY18).
• Concall highlights: (1) Print business is facing turbulence; expect headwinds to continue for the next few quarters. (2) Newsprint cost to remain high for the next 2-3 quarters, post which it should start coming down. (3) The merger of the metro radio business of HTML with the radio business of Next Mediaworks (NMW) is under consideration.
• Muted revenue and rising newsprint prices pose a threat: We cut our consol. revenue estimate by 4%/1% for FY19/20; expect marginal 2% CAGR over FY18-20. This is primarily due to the weak ad revenue outlook because of no clear visibility on a revival in national adspend. However, an uptick in government ad spends in the run up to the general election next year should bode well. Subdued revenue growth, coupled with a sharp rise in newsprint prices (expected to remain high for next few quarters), would amplify the impact on EBITDA. Our revised estimate for RM cost has led to a cut in EBITDA/PAT estimate by 21%/19% for FY19 and by 16%/14% for FY20. We expect EBITDA/PAT to de-grow 8%/13% over FY18-20. Our estimate does not factor the announced merger of radio business with NMW as we await more clarity on the shareholding structure.