Hindustan Media Ventures Ltd. (HMVL) is the fastest-growing Hindi news daily with readership base growth of 18.5% (2007-10) and ad revenue growth of 33% during FY07-10. Its aggressive approach has enabled it to move from the sixth position (2005) to third largest in terms of readership (2009). HMVL has a dominant position in Bihar (readership of 4.5mn in Q3FY10 - IRS), is strong in Delhi NCR (No. 2 player), and is gaining strength in UP/Uttarakhand; IRS data suggests that during 2007-10, HMVL grew 15.2% while Jagran Prakashan declined 2% and Amar Ujala grew only 2.5%. HMVL’s rising readership base and improved yields resulted in revenue growth of 26% and ad revenue CAGR of 32.5% over FY07-10 (~2x that of listed competitors).

Steady operational cost and high operating leverage to significantly drive profitability We estimate HMVL’s ad revenue CAGR at 26% over FY10-12, based on its leadership position in the high-growth state, Bihar, and increasing penetration in the largest print market, UP. With steady operational cost and high operating leverage (RM/sales-40% vs. Jagran Prakashan’s 30% and DB Corp’s 31%), the company’s EBIDTA would grow at 30% CAGR and PAT would grow at 35% CAGR over FY10-12E.

VALUATIONS AND RECOMMENDATION We expect revenue and PAT to grow at 18% and 35% CAGR respectively over FY10-12. At CMP, the stock trades at 14x FY12E EPS (steep discount to current valuations of JPL and DBCL). We initiate coverage on the stock with ‘BUY’ recommendation and 12 month target price of Rs200 (17x FY12E EPS) - maintaining current discount to the valuation (targeted P/E) of DBCL (21x FY12E EPS) and to the valuation (targeted P/E) of JPL (20x FY12E EPS).