MOSL: HT MEDIA (Neutral)-Higher other income supports earnings-softer outlook ahead

HT MEDIA: Higher other income supports earnings; softer outlook ahead

(HTML IN, Mkt Cap USD0.3b, CMP INR88, TP INR92, 5% Upside, Neutral)

• Muted circulation revenue pulls down overall growth: revenue fell 4% YoY to INR5.6b (5% miss), mainly due to a 9% YoY decline in circulation revenue, partly offset by ad revenue growth. Yet, consol. EBITDA of INR805m grew 10% YoY (11% miss), driven by a 12% YoY decline in SGA expenses. This, coupled with a surge in other income (+73% YoY), provided impetus to PAT (+193% YoY to INR750m). Ad revenue grew marginally by 2% YoY to INR4.2b. For FY18, revenue declined 4% YoY to INR23.4b (1% miss), EBITDA grew 34% to INR4b (3% miss) and PAT increased 80% YoY to INR3.1b (12% beat).
• Concall highlights: 1) General elections, coupled with a recovery in the Indian economy, are expected to drive growth. 2) Company expected to face headwinds over the next three quarters from higher newsprint cost, which is expected to impact EBITDA margin by at least 200bp. 3) Radio business EBITDA margin of 35-40% is sustainable.
• Softer outlook for both Hindi and English markets: We expect Hindi print revenue (~40-45% of overall print revenue) to grow at a muted CAGR of 4% over FY18-20 due to 1) slow pick-up in local ad spends and 2) lower per copy realization due to intense competition in key HSP markets. Further, increasing penetration of digitization is expected to continue impacting English print business (-4% YoY). Subsequently, we have cut consol. revenue by 4%/6% for FY19/20E (we expect revenue CAGR of meager 1% over FY18-20). We expect EBITDA/PAT to decline 11%/21% in FY19, primarily due to higher newsprint prices, as it would aggravate the impact of lackluster revenue.