For 3QFY2016, Hindustan Media Ventures Ltd (HMVL) reported earnings above
our estimates. The top-line growth was healthy with strong growth in advertising
and circulation revenue. Advertising revenue growth for the quarter was strong due to
festive season and state elections in Bihar. On the operating front too, the company’s
performance was strong, which in turn led to a higher PAT growth.
Strong growth in ad and circulation revenue: HMVL registered a growth of ~19%
yoy in advertising revenue to ~Rs181cr. This was on back of the festive season that
fuelled advertising spends across most sectors, state elections in Bihar, as well as
internal initiatives. Further, the company reported a ~6% yoy growth in circulation
revenue to Rs54cr on back of higher circulation volume as well as realization per copy.
Higher PAT on back of strong operating performance: The company reported a
strong PAT growth of ~28% yoy on the back of a strong operating performance.
The operating performance was strong on account of lower cost of news print
which is a key raw material for HMVL.
Outlook and valuation: Going forward, we believe that the company would
perform well, both on the top-line and bottom-line fronts, on back of strong
recovery in the Indian economy. Further, we expect strong growth in both
advertising and circulation revenue due to the company’s firm presence in the
states of Uttar Pradesh, Uttarakhand, Bihar and Jharkhand. Further, HT Media is
hiving off its online content business to the company (HMVL). We are awaiting further
clarifications on the deal from the Management in order to assess its financial
implications. Until then, we retain our Neutral rating on the stock.

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