HT Media delivered good set of numbers both on the ad revenue and circulation revenue front. Overall top-line grew 27%YoY to Rs4.6bn where in the advertisement growth was at 27% YoY (highest in the last ten quarters) mainly on account of English print ad, which grew by 25%YoY. Circulation revenue grew 13%QoQ to Rs471mn in Q3FY11 (English circulation revenue grew remarkably by 27% QoQ to Rs165mn).

Robust revenue growth driven by English print business

Ad revenue (80% of total revenue) grew by 27%YoY to Rs3.7bn. The English ad revenue grew by 25%YoY to Rs2.7bn mainly driven by volume growth (for the quarter the volume growth stood at 15% yoy and pricing growth at 8-9%yoy). Circulation revenue declined 2%YoY to Rs470mn however on sequential basis the circulation revenue grew 12%QoQ (the English circulation revenue grew by 27% QoQ to Rs165mn).

Strong business growth from other segments

Radio & Entertainment segment surged by 80%YoY to Rs182mn from Rs101 mn, EBITDA for the segment is at Rs39mn against an EBITDA loss of Rs0.8mn in Q3FY10. The internet business reported revenue growth of 90% to Rs21mn from Rs11mn last year.

Despite increase in raw material margins remain intact

Raw material cost escalated by 46% YoY, mainly on account of hardening of newsprint prices. Raw material as percentage of sales increased from 31% of sales to 35.7% in Q3FY11. Sequentially, raw material to sales decreased marginally by 80bps from 36.5% in Q2FY11. Raw material cost attributed to HT-Burda JV is ~Rs110mn. Resultant PBIDT margin contracted by 130bpsYoY to 19% (sequentially it is up by 120bps from 17.8%). Lower tax rate resulted expansion of NPM to 10.3% from 9.8% in Q3FY10. EPS increased by 33%YoY to Rs2 from Rs1.5 in Q3FY10.

VALUATIONS AND RECOMMENDATION

We believe, HT Media is uniquely placed to capture growth opportunities across the media platforms - Hindi print, English print, Radio and Internet portals. We expect ad revenue to post 16% 2YrCAGR
(FY10-12E) and overall top-line to grow at 18% 2Yr CAGR (FY10-12E). We maintain OPM estimate of 21.8% and 22.7% for FY11E and FY12E respectively. At the CMP, the stock trades at 17xFY12E EPS. We maintain `Hold' recommendation on the stock with a price target of Rs163 (20xFY12E EPS).

Result conference call highlights:

The Company has so far not experienced any slack demand in the advertisement from sectors like real estate and automobiles, despite of increase in the interest rates. We expect the advertisement revenue to grow at a 2 Yr CAGR of 16% to Rs13.3bn in FY12E.

HT- Burda JV contributed ~Rs150mn to the other operational income and reported EBITDA loss of Rs30mn.

Average newsprint cost for the quarter was Rs29/Kg for indigenous newsprint and Rs30.9/Kg for imported newsprint.

Total circulation in copies is 3.58mn (including Hindi - 2.11mn, English (Delhi) - 1mn, English (Mumbai) - 0.33mn and Mint - 0.14mn).