Media - Earnings preview for quarter ended December 2011 - BRICS Research

Expect 11-17% yoy revenue growth in Q3FY12: Revenue growth of 12% for DB Corp, 11.5% for HT Media (HTML), and 17% for Hindustan Media Ventures (HMVL) due to strong growth in advertising in the festival season (October-December). HMVL will benefit from election-related spend in UP and a yield improvement across geographies.

Margins to be mixed: We see DB Corp's EBITDA margins falling 653bps yoy due to increased S&M costs on new launches, but up 465bps qoq because there was a one-time, launch-related expense (two Maharashtra editions) in Q2. HTML is likely to see a yoy margin fall of 67bps due to increased raw material costs on a depreciating rupee. HMVL will see its margins improve yoy by 377bps with improving yields across geographies.

Investment view: We maintain our positive outlook on the print sector despite a slowdown in advertising expenditure because of rising consumption and related ad-spend in tier 2/3 cities, and also structural changes driving growth in media such as improving literacy, low cover prices, and government's focus on rural-centric social spending. DB Corp trades at 15.5x FY12 P/E and 9x FY12E EV/EBITDA; maintain Buy with target price of Rs250. On our estimates, HTML trades at 13x FY12 P/E and 9x FY12 EV/EBITDA; maintain Buy with target price of Rs145. HMVL trades at 11x FY12 P/E and 7x FY12 EV/EBITDA; maintain Buy with target price of Rs180. We need to watch for management commentary about advertising trends after the festive season especially in the context of rising interest rates and slowing consumption.

Source : Equity Bulls

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