HSBC Securities - HT Media

Broking House - HSBC Securities
Recommendation - Overweight


Newspaper industry to achieve vertical growth
In its report dated 30th March, 2007 HSBC securities and capital Markets (HSBC) upgrades HT Media Ltd. (HT) to "Overweight" at its CMP of Rs.178 with target price of Rs.230.

HSBC mentions that the profile of HT Media is transforming from a print company to a comprehensive media offering with the addition of radio and internet businesses. HSBC believes that the media channel and geographical diversification will increase exposure to fast growing radio and on-line segments, and also insulate earnings from shifts in spend by medium and advertising category.

HSBC expects the traditional print business to keep on growing ad revenues by over 20% pa and also anticipates that new ventures in radio and the internet will provide an additional leg of growth. HSBC expects a 28.7% in top line CAGR FY06-08e as the group''s strategy of bundling ad space accelerates HT Media''s ability to garner revenues from geographical expansion and new media formats.

HSBC highlights that HT''s new business newspaper, Mint produced in association with the Wall Street Journal has been successfully launched with an initial print order of 80,000 copies achieving a No.2 position in Delhi and Mumbai market combined. The group also plans expansion into other cities making Mint an important weapon in HT media''s arsenal.

HSBC mentions that HT''s new internet venture plans to leverage on its newspaper business to achieve verticals in matrimonial, real estate and recruitment. HSBC estimates on-line revenues of INR 25 cr in FY08E and growing to INR 130 cr by FY11E.

HSBC points out that HT Media''s "Fever 104 FM" gives the company exposure to FM radio, one of the fastest growing media markets in India and estimates revenue generation of INR 40 cr in FY08E and EBIT break even by FY10E.

HSBC anticipates that HT''s high operating leverage will ensure that profit grows much faster than revenues, driving 126% EPS growth FY07-FY09E. HT media''s FY08E PE multiple of 24.0x is lower than Indian TV stocks'' average PE of 30.8x, but the stock offers superior EPS growth of 62.4%, compared to the 30.4% average in the TV sector. HSBC mentions 12-month PE multiple/DCF price target emerges at INR 230, implying 29.7% absolute upside and upgrades rating to Overweight