For 2QFY2016, 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
pick-up in ad spends by industries. On the operating front, the company’s performance
was strong, which led to a higher PAT growth.
Strong growth in ad and circulation revenue: HMVL registered a growth of ~18%
yoy in advertising revenue to ~Rs168cr, on back of increase in advertising yields
and volumes. Further, the company reported a ~8% yoy growth in circulation revenue
to Rs53cr on back of higher circulation as well as realization per copy.
Higher PAT on back of strong operating performance: The company reported a
strong PAT growth of ~43% yoy due to 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 strong presence in the
states of Uttar Pradesh, Uttarakhand, Bihar and Jharkhand. Further, HT Media is
hiving off its online content business to Hindustan Media Ventures. 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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