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Emkay Global Financial Services Ltd. 1

Financial Snapshot (Consolidated) (Rsmn)

YE- Net EBITDA EPS EPS RoE EV/

Mar Sales (Core) (%) APAT (Rs) % chg (%) P/E EBITDA P/BV

FY13A 20,484 2,826 13.8 1,677 7.2 1.4 11.0 15.1 9.9 1.6

FY14A 22,014 3,132 14.2 1,615 6.9 -3.7 12.3 15.6 9.1 1.4

FY15E 23,118 3,011 13.0 1,865 8.0 15.5 9.9 13.5 9.3 1.3

FY16E 25,500 3,612 14.2 2,343 10.0 25.6 11.3 10.8 7.4 1.2

HT MediaWeak performance, Maintain HOLD

July 28, 2014

Rating

Hold

Previous Reco

Hold

CMP Rs108

Target Price Rs102

EPS Chg FY15E/FY16E (%) -13/-8

Target Price change (%) 2

Nifty 7,749

Sensex 25,991

Price Performance (%) 1M 3M 6M 12M

Absolute -8 16 44 9

Rel. to Nifty -11 1 14 -17

Source: Bloomberg

Relative price chart

70

86

102

118

134

150

Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14

Rs

-40

-30

-20

-10

0

10%

HT Media (LHS) Rel to Nifty (RHS) Source: Bloomberg

Stock Details Sector Media & Entertainment

Bloomberg HTML IB

Equity Capital (Rs mn) 465

Face Value(Rs) 2

No of shares o/s (mn) 233

52 Week H/L 131/ 70

Market Cap (Rs bn/USD mn) 25/ 417

Daily Avg Volume (No of sh) 487,618

Daily Avg Turnover (US$mn) 0.9

Shareholding Pattern (%) Jun'14 Mar'14 Dec'13

Promoters N/A 69.5 69.0

FII/NRI N/A 9.7 13.2

Institutions N/A 7.5 6.4

Private Corp N/A 7.9 8.9

Public 100.0 5.4 2.4 Source: Bloomberg

Naval Seth

naval.seth@emkayglobal.com

+91-22-66242414

Pratik Shah

pratikm.shah@emkayglobal.com

+91-22-66121241

n Below estimates- Revenue at Rs5.4bn (+1% yoy), EBITDA at Rs620mn (-21% yoy). EBITDA margins at 11.3% contracted 307bps yoy. PAT at Rs327mn was down 31% yoy

n Print advt. revenue grew mere 3% yoy to Rs4.2bn. English advt. growth disappointed with 4% yoy decline while Hindi advt. growth was at 17.3% yoy. Circulation revenue growth of 13% yoy was driven by improved realization/copy

n Going forward, we expect English and Hindi ad growth of 3.4% yoy and 14% yoy, respectively, in FY15E

n Given the weak performance, we cut FY15/16E EPS by 13%/8%. Retain HOLD with revised price target of Rs102

Weak Operating performance § Consolidated revenue at Rs5.4bn was 3% below expectations. Revenue growth

was flattish at 1% yoy, primarily on account of weak print advertisement revenue. English ad revenues declined 4% yoy to Rs2.6bn while Hindi ad revenues grew 17.3% yoy to Rs1.5bn. Ad growth in both English and Hindi was driven by yield improvement. Circulation revenue grew 13% yoy to Rs686mn led by improved realization/ copy.

§ EBITDA declined 20.5% yoy to Rs620mn (25% below estimate), with EBITDA margin of 11.3%, which contracted 307bps yoy. Raw material cost (+8.3% yoy due to increase in newsprint prices) and higher employee costs (18.6% yoy) due to wage board increase and increments, impacted operating performance. PAT declined 31% yoy to Rs327mn, due to weak operating performance and higher depreciation on account of policy change.

Hindi business: Better-than-expected ad growth § Revenues grew 16.5% YoY to Rs 2.1bn, driven by ad revenue growth of 17.3% yoy.

Ad revenue growth was mainly due to yield improvement. Circulation revenue grew 17% yoy to 493mn, driven by improving realization/copy.

§ EBITDA at Rs428mn grew 8% yoy with EBITDA margin at 20.4% (-160bps yoy). Raw material and employee cost increase of 27% and 38% yoy restricted EBITDA growth.

Radio revenue growth remains strong, Digital losses continue § Radio revenues grew 12% yoy to Rs240mn with EBIT of Rs46mn vs. Rs36.7mn in

Q1FY14. The digital business reported revenue of Rs237mn (+39% yoy), with an EBIT loss of Rs122mn vis-à-vis Rs171mn in Q1FY14.

Outlook English ad revenue in Q1FY15 was under pressure due to ‘model code of conduct’. Decline in Real Estate and government ad spends dented the overall performance. Pick-up in ad spends in BFSI, Real estate and macro improvement would drive English ad growth. Our estimates factor English ad revenue growth of 3.4%/9% for FY15/16E. English ad revenue growth would drive operating leverage for HT Media, our estimate factor 20% EBITDA growth on 9% English ad growth in FY16E. We have factored INR at Rs60 for FY15/16E; appreciation in INR would drive upgrades in our estimates.

HT Media Result Update

Emkay Research July 28, 2014 2

Exhibit 1: Quarterly financials

Rs mn Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15 YoY (%) QoQ (%) YTD'15 YTD'14 YoY (%)

Sales 5,409 5,347 5,813 5,438 5,464 1.0 0.5 5,464 5,409 1.0

Raw Material 1715 1894 1908 1835 1857 8.3 1.2 1,857 1,715 8.3

as % of sales 31.7 35.4 32.8 33.7 34.0 34.0 31.7

Employee Cost 1055 1065 1059 1058 1252 18.6 18.3 1,252 1,055 18.6

as % of sales 19.5 19.9 18.2 19.4 22.9 22.9 19.5

Other Operating Expenses 1859 1744 1897 1792 1736 (6.6) (3.1) 1,736 1,859 (6.6)

as % of sales 34.4 32.6 32.6 32.9 31.8 31.8 34.4

Total Expenditure 4630 4703 4865 4685 4844 4.6 3.4 4844 4630 4.6

EBITDA 780 644 948 754 620 (20.5) (17.8) 620 780 (20.5)

Depreciation 219 223 200 216 273 25.1 26.5 273 219 25.1

EBIT 561 420 747 538 347 (38.3) (35.6) 347 561 (38.3)

Other Income 276 570 357 421 395 43.1 (6.2) 395 276 43.1

Interest 138 174 164 174 148 7.5 (14.8) 148 138 7.5

PBT 699 816 940 785 593 (15.2) (24.4) 593 699 (15.2)

Tax 184 177 193 363 173 (5.9) (52.4) 173 184 (5.9)

PAT before MI 516 639 747 422 421 (18.5) (0.4) 421 516 (18.5)

Minority interest 41 57 77 74 94 129.6 27.4 94 41 129.6

PAT 475 582 670 348 327 (31.2) (6.2) 327 475 (31.2)

Margins (%) (bps) (bps) (bps)

EBIDTA 14.4 12.0 16.3 13.9 11.3 (307) (252) 11.3 14.4 (307)

EBIT 10.4 7.9 12.9 9.9 6.3 (403) (355) 6.3 10.4 (403)

EBT 12.9 15.3 16.2 14.4 10.9 (207) (358) 10.9 12.9 (207)

PAT 8.8 10.9 11.5 6.4 6.0 (280) (43) 6.0 8.8 (280)

Effective Tax rate 26.2 21.7 20.5 46.2 29.1 286 (1,713) 29.1 26.2 286 Source: Company, Emkay Research

Exhibit 2: Revenue break-up

Rs mn Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15

English Ad 3,049 2,600 2,559 2,493 2,960 2,673 2,769 2,598 3,141 2,843 2,659

% growth YoY 11.1 -3.6 -6.5 -2.8 -2.9 2.8 8.2 4.2 6.1 6.4 -4.0

Hindi ad revenue 1,024 1,136 1,166 1,147 1,182 1,105 1,326 1,270 1,375 1,329 1,555

% growth YoY 8.7 21.8 5.6 1.7 15.4 -2.7 13.7 10.7 16.3 20.3 17.3

Total Print ad revenue 4,073 3,736 3,725 3,640 4,142 3,778 4,095 3,868 4,516 4,172 4,214

% growth YoY 10.5 2.9 -3.0 -1.4 1.7 1.1 9.9 6.3 9.0 10.4 2.9

Circulation 503 483 525 564 565 574 608 642 665 655 686

% growth YoY 6.8 3.0 8.2 11.1 12.3 18.8 15.8 14.0 17.7 14.1 12.8 Source: Company, Emkay Research

Exhibit 3: Ancillary business performance

Rs mn Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13 Q1FY14 Q2FY14 Q3FY14 Q4FY14 Q1FY15

Radio sales 173.5 196.2 186.0 199.2 218.0 184.3 214.1 221.6 267.0 228.8 239.7

EBIT -9.3 -14.6 14.5 23.8 25.2 10.5 36.7 46.9 77.9 48.1 45.7

Digital revenue 116.7 134.0 120.6 133.1 138.0 146.1 170.5 178.1 195.4 218.2 237.2

EBIT -93 -81 -117 -100 -89 -81 -171 -103 -76 -76 -122 Source: Company, Emkay Research

HT Media Result Update

Emkay Research July 28, 2014 3

Estimate revision

Given the weak performance in Q1FY15, we have revised our estimates downwards. Our revenue estimates gets revised marginally but EBITDA estimate is cut by 14%/11% for FY15/16E. EBITDA cut is primarily on account of marginal cut in revenue and increase in employee expense. Similarly, EPS gets revised downward by 13%/8% for FY15/16E. EPS cut is lower than EBITDA as we have increased other income estimates.

Exhibit 4: Estimate revision

FY15E FY16E

Particulars Old New % Change Old New % Change

Revenue 23,626 23,118 -2.1% 25,841 25,500 -1.3%

EBITDA 3,495 3,011 -13.8% 4,038 3,612 -10.6%

EBITDA Margin % 14.8 13.0 -177 bps 15.6 14.2 -146 bps

PAT 2139 1865 -12.8% 2549 2343 -8.1%

EPS 9.1 8.0 -12.8% 10.9 10.0 -8.1% Source: Company, Emkay Research

Concall highlights

§ Advertisement growth: Ad revenue growth was sluggish on account of loss of DAVP advertising (as model code of conduct was implemented) and decline in overall contribution from the real estate segment. Hindi segment was able to offset the loss of ad revenue on account of model code of conduct with political party ad spends.

§ Advertisement growth was primarily driven by 8% yoy improvement in yields on consolidated basis. For the English ad segment, yield improvement was ~4-5% yoy while volumes exhibited a decline of 7-8% yoy. The metros witnessed tepid growth both in Delhi and Mumbai. Decline in contribution from BFSI, real estate and automobiles affected the overall ad growth.

§ The company has ~20-22% ad market share in U.P. It has seen ~20% yoy yield improvement post robust readership numbers published by IRS in its last survey.

§ Overall circulation remained at similar on yoy basis. However, for the Hindi business circulation was increased by 250,000 copies. Region-wise circulation (number of copies): Delhi - 1mn, Mumbai – 4.3lakh, Mint – 1.3lakh, Hindi - 2.5mn

§ Expenses: Raw material costs increased as highest cost inventory got absorbed in Q1FY15 vs lowest cost inventory in Q1FY14 (when INR/$ was at Rs56.8). Going forward, the company expects newsprint prices to soften.

§ Increase in employee costs was due to increments and regulatory charge. On a normalized basis, the company expects employee costs to be ~21% of sales. Regulatory costs were one time in nature.

§ Despite of weak revenue growth in Mumbai, the company reported EBITDA break-even.

§ Digital Business: The company expects digital losses at Rs350mn for FY15E. It expects to breakeven by the end of FY16E. The company is open to inorganic growth opportunities which can complement their existing portals.

§ Radio: HT media plans to participate in the upcoming Phase III auctions and wants to expand its reach from 4 cities to 10. The company doesn’t want to be very aggressive as far as increasing its reach in large number of cities

§ Capex for FY15E at Rs1bn, majority to be invested across radio, education and digital business. HT plans to increase the number of educational centers (Study Mate) to 22-24 from currently 12.

§ Ads for Equity stands at Rs2.95bn, Net cash was at Rs9.5bn.

HT Media Result Update

Emkay Research July 28, 2014 4

Key Financials (Consolidated)

Income Statement Y/E Mar (Rsmn) FY13A FY14A FY15E FY16E

Net Sales 20,484 22,014 23,118 25,500

Growth (%) 2.3 7.5 5.0 10.3

Expenditure 17,657 18,882 20,106 21,888

Raw Materials 7,268 7,353 7,595 8,161

Employee Cost 3,921 4,237 4,943 5,325

Other Exp 6,469 7,293 7,569 8,402

EBITDA 2,826 3,132 3,011 3,612

Growth (%) -1.5 10.8 -3.9 19.9

EBITDA margin (%) 13.8 14.2 13.0 14.2

Depreciation 914 858 952 976

EBIT 1,912 2,274 2,059 2,636

EBIT margin (%) 9.3 10.3 8.9 10.3

Other Income 938 1,623 1,305 1,395

Interest expenses 446 649 440 416

PBT 2,404 3,248 2,924 3,615

Tax 623 917 802 1,012

Effective tax rate (%) 25.9 28.2 27.4 28.0

Adjusted PAT 1,781 2,331 2,122 2,603

Growth (%) 3.8 30.9 -8.9 22.6

Net Margin (%) 8.7 10.6 9.2 10.2

(Profit)/loss from JVs/Ass/MI 104 248 257 260 Adjusted PAT After JVs/Ass/MI

1,677 2,083 1,865 2,343

E/O items 0 -468 0 0

Reported PAT 1,677 1,615 1,865 2,343

PAT after MI 1,677 2,083 1,865 2,343

Growth (%) 1.4 24.2 -10.4 25.6

Balance Sheet Y/E Mar (Rsmn) FY13A FY14A FY15E FY16E

Equity share capital 470 469 469 469

Reserves & surplus 15,506 17,474 19,226 21,454

Net worth 15,976 17,943 19,695 21,923

Minority Interest 1,438 1,534 1,764 1,994

Secured Loans 4,341 4,526 3,826 3,526

Unsecured Loans 0 0 0 0

Loan Funds 4,341 4,526 3,826 3,526

Net deferred tax liability -31 -31 -31 -31

Total Liabilities 21,723 23,972 25,254 27,412

Gross Block 11,964 12,679 13,101 13,515

Less: Depreciation 4,681 5,370 6,144 6,934

Net block 7,283 7,309 6,957 6,581

Capital work in progress 1,143 1,143 1,143 1,143

Investment 9,731 12,831 13,831 15,331

Current Assets 9,913 10,771 11,716 14,191

Inventories 1,631 2,219 2,446 2,826

Sundry debtors 2,712 2,837 3,117 3,590

Cash & bank balance 1,569 1,177 1,156 2,008

Loans & advances 3,097 3,540 3,949 4,611

Other current assets 904 998 1,048 1,156

Current lia & Prov 6,348 8,082 8,393 9,834

Current liabilities 6,093 7,779 8,055 9,411

Provisions 255 303 338 423

Net current assets 3,565 2,689 3,323 4,357

Misc. exp 0 0 0 0

Total Assets 21,723 23,972 25,254 27,412 Cashflow Y/E Mar (Rsmn) FY13A FY14A FY15E FY16E

PBT (Ex-Other income) 1,466 1,625 1,619 2,220

Depreciation 914 858 952 976

Interest Provided 446 649 440 416

Other Non-Cash items 0 0 0 0

Chg in working cap -273 484 -655 -182

Tax paid -623 -917 -802 -1,012

Operating Cashflow 1,899 3,425 2,163 3,136

Capital expenditure -1,279 -884 -600 -600

Free Cash Flow 620 2,541 1,563 2,536

Other income 938 1,623 1,305 1,395

Investments -1,411 -3,100 -1,000 -1,500

Investing Cashflow -1,752 -2,361 -295 -705

Equity Capital Raised 0 -1 0 0

Loans Taken / (Repaid) 466 185 -700 -300

Interest Paid -446 -649 -440 -416

Dividend paid (incl tax) -110 -110 -110 -110

Income from investments 0 0 0 0

Others 0 0 0 0

Financing Cashflow -89 -575 -1,250 -826

Net chg in cash 58 489 618 1,606

Opening cash position 1,584 1,569 1,177 1,156

Closing cash position 1,569 1,177 1,156 2,008

Key Ratios Y/E Mar FY13A FY14A FY15E FY16E

Profitability (%)

EBITDA Margin 13.8 14.2 13.0 14.2

Net Margin 8.7 10.6 9.2 10.2

ROCE 13.9 17.1 13.7 15.3

ROE 11.0 12.3 9.9 11.3

RoIC 20.6 25.1 23.0 29.2

Per Share Data (Rs)

EPS 7.2 6.9 8.0 10.0

CEPS 11.1 12.5 12.0 14.2

BVPS 68.1 76.5 84.0 93.5

DPS 0.4 0.4 0.4 0.4

Valuations (x)

PER 15.1 15.6 13.5 10.8

P/CEPS 9.7 8.6 9.0 7.6

P/BV 1.6 1.4 1.3 1.2

EV / Sales 1.4 1.3 1.2 1.0

EV / EBITDA 9.9 9.1 9.3 7.4

Dividend Yield (%) 0.4 0.4 0.4 0.4

Gearing Ratio (x)

Net Debt/ Equity 0.2 0.2 0.1 0.1

Net Debt/EBIDTA 1.0 1.1 0.9 0.4

Working Cap Cycle (days) 35.6 25.1 34.2 33.6

HT Media Result Update

Emkay Research July 28, 2014 5

DISCLAIMER: Emkay Global Financial Services Limited and its affiliates are a full-service, brokerage, investment banking, investment management, and financing group. We along with our affiliates are participants in virtually all securities trading markets in India. Our research professionals provide important input into our investment banking and other business selection processes. Investors may assume that Emkay Global Financial Services Limited and/or its affiliates may seek investment banking or other business from the company or companies that are the subject of this material and that the research professionals who were involved in preparing this material may participate in the solicitation of such business. Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses may make investment decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Additionally, other important information regarding our relationships with the company or companies that are the subject of this material is provided herein. This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation or which would subject Emkay Global Financial Limited or its group companies to any registration or licensing requirement within such jurisdiction. Specifically, this document does not constitute an offer to or solicitation to any U.S. person for the purchase or sale of any financial instrument or as an official confirmation of any transaction to any U.S. person unless otherwise stated, this message should not be construed as official confirmation of any transaction. No part of this document may be distributed in Canada or used by private customers in United Kingdom. All material presented in this report, unless specifically indicated otherwise, is under copyright to Emkay. None of the material, nor its content, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without the prior express written permission of Emkay. All trademarks, service marks and logos used in this report are trademarks or registered trademarks of Emkay or its Group Companies. The information contained herein is not intended for publication or distribution or circulation in any manner whatsoever and any unauthorized reading, dissemination, distribution or copying of this communication is prohibited unless otherwise expressly authorized. Please ensure that you have read “Risk Disclosure Document for Capital Market and Derivatives Segments” as prescribed by Securities and Exchange Board of India before investing in Indian Securities Market. In so far as this report includes current or historic information, it is believed to be reliable, although its accuracy and completeness cannot be guaranteed.

Emkay Global Financial Services Ltd.

CIN - L67120MH1995PLC084899

7th Floor, The Ruby, Senapati Bapat Marg, Dadar - West, Mumbai - 400028. India

Tel: +91 22 66121212 Fax: +91 22 66121299 Web: www.emkayglobal.com

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