Print Industry Coverage

8/14/2019 Print Industry Coverage

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ICICIdirect|Equity Research

November 18, 2009 | Print

Initiating Coverage

Print Media Sector

Regional - the way to goThe Print Media sector has started gaining momentum after witnessing asetback in FY09 due to the economic slowdown coupled with newsprintprices peaking at $960/tonne. We have seen a selective recovery in thesector with companies with a regional focus finding solace in risingadvertisement spends and declining newsprint prices ($560/tonne) in thecurrent fiscal. High cost inventory is already out of the system & isexpected to aid margins from Q3FY10E. However, accelerated revenuegrowth in core businesses would be seen post FY10E. We expect our printuniverse to post revenue CAGR of 11.8% and EBITDA CAGR of 36.6% overFY09-12E. With highest margins & additional contribution from IPL,Deccan Chronicle (DC) is our top pick. We initiate coverage on DC and HTMedia with STRONG BUY and REDUCE rating, respectively. Being a pure

regional player, we reiterate our BUY rating on Jagran Prakashan.

Rising ad spendAdvertisement is the major revenue driver for the media industry,contributing ~65% of total revenue of print companies. Over the pastthree years, advertisement is expected to have grown at a CAGR of17.1%. Although the recent past has yielded mixed results, the long-term scenario looks positive for the Indian advertisement industry.India is still under penetrated and behind developed nations and evenChina when compared on advertisement to GDP ratio. This indicates further potential for rise in ad spend for the Indian media industry.Advertisement revenue in the print Industry is expected to grow at a five year CAGR (FY08-13E) of 10.0% led by expansion in emergingsectors like organised retail, telecom, insurance, BFSI and education.

Growing regional focusThe Indian print industry is highly fragmented with over 60,000newspaper published in 22 languages. According to IRS, Hindinewspapers have highest penetration followed by English, Marathi,Tamil and Telugu. In the backdrop of consumption shifting to smallertowns and villages, the industry has seen various vernacular launchesin order to increase circulation and shield against seasonal downturnin national advertising in the recent past. In total, 14 of the top 15 mostread dailies in the country are either Hindi or vernacular. In the recenteconomic slowdown, national players were the most impacted while

their regional counterparts did not really face the heat. Going forward,we expect companies with a regional focus like Jagran Prakashan tooutpace their national counterparts in terms of print revenue growth.

Outlook and recommendationPrint media companies have exhibited a diverse trend in the recentpast, with regional players posting robust revenue growth while theirnational counterparts have witnessed a decline in advertisementrevenue. We believe regional players would continue to outperformthe overall print industry as demand in Tier II and Tier III cities andtowns has proved to be more resilient to the slowdown.We advise cherry picking among media companies with a preference for companies with higher regional exposure. We maintain Jagran

Prakashan as BUY and initiating coverage on HT Media with REDUCErating. Deccan chronicle with highest operating margin and additionalcontribution from IPL is rated as STRONG BUY.

Analysts Name

Naval [email protected] [email protected]

Comparative return metrics1M 3M 6M 12M

HT Media 10.0 33.5 110.6 130.6

Deccan Chronicle 2.8 54.7 173.2 254.1

Jagran Prakashan 7.9 20.0 123.4 146.4

HT Media (HTMED)

CMP Rs 138

TP Rs 125

Upside % -9%

Market Cap Cr 3230

FY09 FY10E FY11E

Revenue Rs Cr 1347 1448 1613

EBITDA Rs Cr 88 272 318

EBITDA % % 6.5 18.8 19.7

PAT Rs Cr 0.9 123 163

EPS Rs 0.0 5.3 6.9

P/E x 3566.3 26.2 19.9

EV/EBITDA x 39.0 12.7 10.7

Deccan Chronicle (DECCHR)

CMP Rs 152TP Rs 186

Upside % 23%

Market Cap Cr 3705

FY09 FY10E FY11E

Revenue Rs Cr 968 1120 1253


EBITDA % % 31.0 44.8 43.9

PAT Rs Cr 142 317 322

EPS Rs 5.8 13.0 13.2

P/E x 26.1 11.7 11.5

EV/EBITDA x 11.9 6.5 5.5

Jagran Prakashan (JAGPRA)

CMP Rs 119

TP Rs 134

Upside % 12%

Market Cap Cr 3590

FY09 FY10E FY11E

Revenue Rs Cr 823 930 1057


EBITDA % % 19.0 29.7 31.6

PAT Rs Cr 92 167 201

EPS Rs 3.0 5.5 6.7

P/E x 39.2 21.5 17.8

EV/EBITDA x 22.3 12.0 9.4

REDUCE

STRONG BUY

BUY

November 18, 2009 | Sector Reprot


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Table of Content Page

1) Print Media Industry-Macro Environment 3a) Rising ad spend 5

i)

Advertisement in print 6b) Growing regional focus 8i) Localization of content 10ii) Hindi and vernacular space a cheaper option 10iii) Regionalization resulting in intense competition 11

c) Increasing penetration next driver for circulation 11d) Newsprint prices cool off 12e) Diversification to de-risk core business 14

2) Risk and concerns 153) Financials 164) Valuations 18Companies:

1) HT Media 21a) Investment rationale 24

i) Regional advertisement the next growth driver 24ii) Hindustan going strong 24iii) Hindustan Times second largest English daily 27iv) Mint gaining momentum 30v) Circulation to inch up going forward 31vi) Radio 32vii)Online ventures still in investment mode 33

b) Risk and concerns 35c) Financials 36d) Valuations 39

2) Deccan Chronicle 46a) Investment rationale 49

i) Deccan Chronicle King of the South 49ii) Major revival in ad revenue post FY10E 51iii) IPL the golden goose 52iv) Odyssey in expansion mode 54v) Sieger Solution Halt on expansion 55b) Risk and concerns 56

c) Financials 57d) Valuations 61

3) Jagran Prakashan 67a) Valuations 70


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Macro environment

The print media industry is characterised by high fragmentation andregional dominance. The country has over 60,000 newspapers printed in22 languages. According to various Indian Readership Surveys (IRS),more than 85% of the countrys total print publications are in Hindi and

other vernacular languages. Moreover, all dailies have managed to gaindominance only in specific regions.

Although it is the second largest print market in the world with areadership base of over 255 million, the Indian market, given itspopulation base, is still under penetrated. Urban penetration stands at85% while that for rural markets stands at a mere 33%. According to IRS,about 359 million people in India can read and understand at least onelanguage but do not read any publication. With such low penetrations,we believe a huge growth opportunity lies ahead for print companies,especially in vernacular markets.

Exhibit 1:Indian demographic metricsUrban Rural Total

Population (Millions) 268 584 852

Literacy % 83% 62% 68%

Readership (% of literates) 42% 21% 29% Source: IRS R1 2009, ICICIdirect.com Research; Age group 12+

The print industry has grown to Rs 173 billion in FY08, registering a threeyear CAGR (FY05-08) of 13.8%. Advertisement contributes ~63% to thetotal revenue while ~37% is contributed by circulation revenue.

Exhibit 2:Indian print media industry Revenue break-up

84.9 100.2108.4 114.8 123.8

136.5 153.6174.347.7

53.760.2 64.2

69.174.1

79.585.7

91.7

69.4

0

50

100

150

200

250

300

FY05 FY06 FY07 FY08 FY09E FY10E FY11E FY12E FY13E

Rsbillion

Ad Revenue Circulation Revenue

Source: FICCI report2009, ICICIdirect.com Research

The print industry has grown toRs 173 billion in FY08, registeringa three year CAGR (FY05-08) of13.8%. Advertisement contributes~63% to the total revenue while~37% is contributed bycirculation revenue.

Low readership in rural India

implies huge growth potential for

regional/Hindi print media


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Exhibit 3:Print industry

108.0 128.3148.3 158.7 169.0

181.8 198.5220.4

245.49.110.3

12.1 13.9 14.9

16.217.6

18.920.6

0

50

100

150

200

250

300


Rsbillion

Newspaper Magazine

Source: FICCI report 2009, ICICIdirect.com Research

The Indian print media sector suffered on account of the global meltdownand financial crises resulting in lower advertisement revenue growth inFY09. Major advertisers like realty, banking & financial sector and IT wereamong the worst hit during the global crisis leading to ad spendsshrinking. Companies in the print space were pushed further into thecorner with mounting operating costs led by all-time high newsprintprices. Operating margins across the board declined by an average of51% in FY09, with the exception of Jagran Prakashan that declined bymere 13%. The arrest in margin decline was mainly achieved due tolower inventory storage.

However, with cooling of newsprint prices, clearing out of high costinventory in the system and improving macroeconomic conditions we

expect print companies to get back to a higher trajectory post Q3FY10E.Our claim is supported by the recent trend exhibited in Q2FY10 results.The advertisement and circulation revenue of companies under theICICIdirect.com print universe recorded a YoY growth of 11.0% inH1FY10 as against mere 3.3% in H1FY09. Also, the EBITDA marginimproved from 23.8% in H1FY09 to 33.0% in H1FY10.

Exhibit 4:YoY growth in print revenue and raw material cost for ICICIdirect.com print universe

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10

Revenue Growth Expenditure Growth

Source: Company, ICICIdirect.com Research

Revenue growth has exceeded

the growth in raw material cost.

Raw material posted a negative

growth in Q2FY10 on the back of

a steep decline in raw materialprices, as compared to last year.

We expect raw material prices to

inch up slightly and remain stable

at those levels

~92% of the total print revenue

is contributed by newspapers

while smaller portion of ~8% isby magazines


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Rising ad spendAdvertisement is one of the major revenue drivers for the mediaindustry. Over the past three years, advertisement has grown at aCAGR of 17.1%. However, due to the recent turmoil in the worldeconomic scenario, advertisement budgets have shrunk acrossindustries. Consequently, we expect slow growth in this revenuestream in the current year.

Nevertheless, the long-term scenario looks positive for the Indianadvertisement industry. India is still under penetrated and behinddeveloped nations and even China when compared onadvertisement to GDP ratio. This indicates further potential for risein ad spend for the Indian media industry. Ad spends as apercentage of GDP have been on an upward trend for more than adecade. It grew from 0.31% in FY98 to 0.47% in FY08.

Exhibit 5:Indian ad revenue industry (Rs billion)FY05 FY06 FY07 FY08 FY09E FY10E FY11E FY12E FY13E % CAGR (FY05-08) % CAGR (FY08-13E)

Television 51.9 60.5 71.1 82.5 88.2 97.1 112.6 131.7 155.5 16.7 13.5

Print 69.4 84.9 100.2 108.4 114.8 123.8 136.5 153.6 174.3 16.0 10.0

Radio 4.9 6.0 7.4 8.4 9.2 10.3 11.9 13.9 16.3 19.7 14.2

Internet Advertising 2.0 2.0 3.9 6.2 8.4 11.0 13.7 17.1 21.4 45.8 28.1

Outdoor 10.0 11.7 14.0 16.1 17.7 19.8 22.4 25.5 29.3 17.2 12.7

Total 138.2 165.1 196.6 221.6 238.3 262.0 297.1 341.8 396.8 17.0 12.4


Exhibit 6:Ad spend as a percentage of GDP globally

1.34

0.95

0.54

0.47

0 0.2 0.4 0.6 0.8 1 1.2 1.4 1.6

US

UK

China

India


India is still under penetrated andbehind developed nations andeven China when compared onadvertisement to GDP ratio.


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Exhibit 7:Ad spend as percentage of GDP in India0.47

0.400.380.37

0.350.31

0.37

0.33

0.00

0.05

0.10

0.15

0.20

0.250.30

0.35

0.40

0.45

0.50

1994 1996 1998 2000 2002 2004 2006 2008

Ad spend as percentage to GDP


Advertisement in printAdvertisement revenue is one of the major revenue drivers for printmedia companies. It contributes almost as high as 90% of the totalrevenue for English dailies and about 70% for Hindi dailies. On anindustry wide basis, advertisement contributes about 65% of thetotal print media revenue.

Exhibit 8:Break-up of total print ad revenue of Rs 10800 crore in FY08

English Daily, 45%Hindi Daily, 19%

Magazines, 7%

Business Daily, 6%

Regional Daily, 23%

English Daily Regional Daily Hindi Daily Magazines Business Daily

57% - Contributed by Delhi &

Mumbai

43%- Other markets

Source: FICCI report 2009, Company, ICICIdirect.com Research

Growth in advertisement revenue led by expansion in emergingsectors like organised retail, telecom, insurance and education isexpected to outpace circulation growth. Advertisement revenue isexpected to grow at a five year CAGR (FY08-13E) of 10.0% whilecirculation revenue is expected to grow at 7.4% over the sameperiod.

Ad spends as a percentage ofGDP have been on an upwardtrend for more than a decade. It

grew from 0.31% in FY98 to0.47% in FY08.


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Exhibit 9:Print advertisement

69.484.9

100.2108.4 114.8

123.8136.5

153.6

174.3

18.0

22.3

10.35.9

7.8

13.512.5

8.2

0

20

40

60

80

100

120

140

160

180

200


Rs

crore

0.0

5.0

10.0

15.0

20.0

25.0

%

Print Ad revenue Growth

FY08-FY13E CAGR of 10%


Exhibit 10:Volume growth in print

100127

113124

203

252 261

301 311321

0

50

100

150

200

250

300

350

FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08

Index Growth: Year 199 = 100

Source: AdEx India, ICICIdirect.com Research

Exhibit 11:Average ads per day in newspapers

100130 141

157

257

386

420

469 466 460

0

50

100

150

200

250

300

350

400

450

500

FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08

Index Growth: Year 199 = 100

Source: AdEx India, ICICIdirect.com Research

Growth in advertisement revenueled by expansion in emergingsectors like organised retail,telecom, insurance and education

is expected to outpace circulationgrowth. Advertisement revenue isexpected to grow at a five yearCAGR (FY08-13E) of 10.0%

Print ad volumes increased 2.2

times in 2008 compared to that

in 1999

Average ads per day in

newspapers increased 3.6

times in 2008 over 1999


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The Indian print media sector suffered on account of the globalmeltdown and financial crises resulting in lower advertisementrevenue growth in FY09. Major advertisers like realty, banking &financial sector and IT were among the worst hit during the globalcrisis leading to ad spends shrinking. The advertisement spend isexpected to remain under pressure during the current fiscal andwould lead to moderate growth in ad revenue. Print media ad

revenue is expected to grow at 7.8% in FY10E.

Nevertheless, corporates are inching up their ad spends and theindustry has recovered since its worst show in H2FY09. It is steadilyreturning to its earlier high growth trajectory. A major rise in adrevenue would be visible after FY10E. The industry is expected togrow at 10.0% CAGR (FY08-FY13E) to Rs 174 billion.

Exhibit 12:Ad revenue growth

-5%

5%

15%

25%

35%

45%

55%65%

75%

85%

FY07 FY08 FY09 FY10E FY11E FY12E

HT Media Deccan Chronicle Jagran Prakashan


Exhibit 13:Top 10 print advertising sectors (Jan-Jun 2009)Top 10 Advertisers (H1CY09) % Share

Education 19

Services 11

BFSI 9

Auto 7

Retail 4

Personal Accessories 3

Personal Healthcare 3

Durables 3

Corporate/Brand Image 2

Media 2 Source: AdEx India, ICICIdirect.com Research

Growing regional focusThe Indian print industry is highly fragmented with over 60,000newspapers published in 22 languages. According to IRS, Hindinewspapers have highest penetration followed by English, Marathi,Tamil and Telugu. In the backdrop of consumption shifting to

smaller towns and villages, the industry has seen various vernacularlaunches in order to increase circulation and shield against seasonaldownturn in national advertising.

Improvement in ad revenue growth is

expected from FY10E onwards. All

companies in the ICICIdirect.com

print universe are expected to post

ad revenue growth in excess of 11%

in FY11E and FY12E


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Exhibit 14:Newspaper readership in India

39

191

130

0

30

60

90

120

150

180

210

English Top 10 Hindi Top 10 Vernacular Top 10

ReadershipinMillions

Source: IRS R2 2008, ICICIdirect.com Research

Exhibit 15:Top 15 newspaper in IndiaRanking Newspaper Language AIR (Lacs)

1 Dainik Jagran Hindi 160.7

2 Dainik Bhaskar Hindi 128.8

3 Hindustan Hindi 93.0

4 Malayala Manorama Malyalam 88.8

5 Amar Ujala Hindi 81.8

6 Daily Thanthi Tamil 76.1

7 The Times Of India English 68.7

8 Lokmat Marathi 67.9

9 Rajasthan Patrika Hindi 66.7

10 Ananda Bazar Patrika Bengali 65.5

11 Eenadu Telegu 65.3

12 Mathrubhumi Malyalam 64.113 Dinakaran Tamil 54.2

14 Gujarat Samachar Gujarati 54.2

15 Daily Sakal Marathi 40.2

Source: IRS 2009 R1, ICICIdirect.com Research

Exhibit 16:Some of the recent launchesNewspaper Recent Launches

Hindustan Times Metro Now

Mint

Shine.com

Times of India Gujarati and Hindi edition of Economic Times

Mail Today32 page Premium edition on weekends

Jagran Prakashan City plus

I-Next

Dainik Bhaskar Ludhiana and Patiala editions

Six edition in M.P (Chattisgarh, Bhilai, Jagdalpur, Ratlam)

Launched in Haryana, Shimla and Rajasthan

Launched Hindi financial daily (Business Bhaskar)

Expanded Business Bhaskar with launch of 13 editions

Business Standard Hindi edition of Business Standard

Financial Express Lucknow edition

DNA Ahmedabad and Surat editions

Source: Industry, ICICIdirect.com Research

Readership figures clearly show

consumer preference for the regional

press. Hindi is the most read

language in the country followed by

English, Tamil, Malayalam andTelugu

Only one English newspaper figures

in top 15 national dailies in India.

This strengthens our argument in

favour of regional dominance in the

print media

Sensing the immense potential in

regional markets, players are trying

to mark footprints in untapped

markets. Established national

players are leveraging their brand

value to enter the regional space.

This is evident from some of the

launches in the past two years


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Exhibit 18:Premium to English over Hindi and vernacularAdvertising Circulation Total

English 2099 728 2827

Hindi 233 208 441

Vernacular 157 203 360

Premium of English Over Hindi 9.0x 3.5x 6.4x

Premium of English over Vernacular 13.4x 3.6x 7.9x

LanguagePer reader revenue (Rs)

Source: FICCI Report2009, ICICIdirect.com Research

Regionalisation resulting in intense competitionNational daily cover prices have traditionally been on the lower sideand they have been unable to recover the cost of production. Printcompanies have been dependent on advertising revenue to recovertheir cost and improve margins. This is evident from the increase incolour content in national dailies in a bid to gain moreadvertisements. Colour content lends more appeal to advertisementand provides more value to media buying agencies.

Although regionalisation presents companies with an opportunity totap relatively newer markets, a simultaneous focus of major printcompanies on these markets has turned them into a red sea. Coverprices for regional and vernacular newspapers have generally beenon the higher side compared to their English counterparts.Aggressive competition in the regional print space has let to aninevitable price war. Many players have dropped average coverprices to gain market share and improve circulation. Going forward,we expect the look and feel of regional papers to improve in orderto compete more effectively with English newspapers.

Increasing penetration next growth driver for circulationAdvertisement revenue is directly linked to economic growth, whilecirculation is led by an increase in penetration and literacy rate.Circulation revenue is primarily a volume game. Companies areexpanding their operations and focusing on Tier II and Tier III citiesto increase circulation in the vernacular or Hindi space. India has thesecond largest readership base of 255 million, with 85% reach inurban markets and a stifled reach of only 33% in rural areas. Thisprovides enough room for further penetration.

Large players like Times of India, Dainik Bhaskar, HT Media, JagranPrakashan and Deccan Chronicle are continuously expanding andleveraging their brand to enter local space. These companies havestarted publishing city centric supplements or have entered theregional space with vernacular or Hindi editions.

Although we have seen some recent cover price hikes by someregional players, we believe these are one-off cases. In our view,they do not indicate at any sustainable trend, going forward. Giventhe highly competitive and fragmented nature of the market it wouldbe difficult for print companies to increase the average cover price.

Circulation revenue is expected to grow from Rs 64.2 crore in FY07E

to Rs 91.7 in FY13E, implying a CAGR of 7.4%.

Traditionally, large metro cities,which also tend to have highpercentage of English newspaperreadership, have commandedsignificant advertising ratepremium over non-metronewspapers. However the trend is

changing and we expect thisanomaly to get corrected asregional media gets its dueimportance, owing to superiorconsumption & higher growthpotential.


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Exhibit 19:Circulation revenues

47.753.7

60.264.2

69.174.1

79.585.7

91.712.6

12.1

7.07.87.37.27.66.6

0

10

20

30

40

50

60

70

80

90

100


Rsbillion

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

%

Circulation Revenue Growth

FY08-FY13E CAGR of 7.4%


Exhibit 20:Ad-circulation ratio (Standalone for FY09)

73.1%88.0% 93.5%

26.9%12.0% 6.5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jagran Prakashan HT Media Deccan Chronicle

Ad Revenue Circulation Revenue


Newsprint prices cool offNewsprint is an indispensable raw material component for the printmedia industry accounting for more than 50% of the total operatingexpenditure for print companies.

During FY09, the economic slowdown coupled with highernewsprint prices had played spoilsport for the print media industry.Both domestic and international newsprint prices were trading atpeak levels. During last year domestic newsprint prices had risen toRs 43500/MT from Rs 30000/MT in January 2008 while internationalnewsprint prices traded at ~$960/MT in November 2008 ascompared to $600/MT(ex landing and freight cost) in November2007. The price rise was led by increase in crude prices and highdemand of newsprint from China and US due to Olympics and theUS presidential elections.

National players like HT Media and Deccan Chronicle, which arehighly dependent on imported newsprint, suffered a huge dent in

margins during FY09, while companies like Jagran Prakashan thatrely heavily on domestic newsprint were comparatively lessaffected.

Circulation revenue is expected togrow from Rs 64.2 crore in FY07Eto Rs 91.7 in FY13E, implying aCAGR of 7.4%.


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Exhibit 21:Average newsprint cost of listed companies for FY09Newsprint Average cost (Rs/MT) Imported as % of total Newsprint

Deccan Chronicle 40,739 90

HT Media 34,334 70

Jagran Prakashan 29,517 20


Exhibit 22:Raw material as percentage of net revenue

0%10%

20%

30%

40%

50%

60%

70%

Q1FY08 Q2FY08 Q3FY08 Q4FY08 Q1FY09 Q2FY09 Q3FY09 Q4FY09 Q1FY10 Q2FY10



However, newsprint prices have now cooled off and are back totraditional levels, giving relief to print companies. This is alsoreflecting in the raw material cost as a percentage of net revenue for

all three companies. We expect the share of newsprint cost in totaloperating cost to fall further as low cost inventory would start flowing into the system. We expect domestic and landedinternational newsprint prices to remain in the range of Rs~26000/MT and ~$550/MT, respectively, for the rest of FY10E.

Exhibit 23:Newsprint prices

5000

10000

15000

20000

25000

30000

35000

40000

45000

50000

Jan-06

Mar-06

May-06

Jul-06

Sep-06

Nov-06

Jan-07

Mar-07

May-07

Jul-07

Sep-07

Nov-07

Jan-08

Apr-08

Jun-08

Aug-08

Oct-08

Dec-08

Feb-09

Apr-09

Jun-09

Aug-09

Oct-09

Rs/MT

0

100

200

300

400500

600

700

800

$/MT

Domestic (LHS) International (RHS)

Source: CMIE, ICICIdirect.com Research

Deccan with highest dependenceon imported newsprint was thehighest impacted with risingnewsprint prices. Raw materialcost as a percentage of revenuewent up from 38.6% in FY08 to41.5% in FY09 for HT Media, from26.5% to 52.4% for DeccanChronicle and 36.2% to 41.5% forJagran Prakashan.

Both domestic and internationalnewsprint prices were trading atpeak levels. During last yeardomestic newsprint prices hadrisen to Rs 43500/MT from Rs30000/MT in January 2008 whileinternational newsprint pricestraded at ~$960/MT in November2008 as compared to $600/MT inNovember 2007.


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Risks & concerns

Volatility in raw material pricesNewsprint prices witnessed a highly volatile cycle during FY09. Bothinternational and domestic newsprint prices peaked at $960/MT and Rs43500/MT, respectively, in the last fiscal year. On account of this, the rawmaterial cost for print media companies had significantly shot up,affecting the profitability. HT Media was among the worst hit as companyconsumes a higher proportion of international newsprint.

Raw material cost as a percentage of revenue went up from 38.6% inFY08 to 41.5% in FY09 for HT Media, from 26.5% to 52.4% for DeccanChronicle and 36.2% to 41.5% for Jagran Prakashan. This highlights thehigh sensitivity of EBITDA margin of print media companies to newsprintprices.

Exhibit 25:Operating cost break-up for FY08

973.1

332.4

640.9

18.4

Raw material cost Employee expenses SG&A Other


Exhibit 26:Operating cost break-up for FY09

1,407.9

416.5

684.9

84.2

Raw material cost Employee expenses SG&A Other


Currently, newsprint prices are at the lower end. International prices are~ $490/MT while domestic prices are ~Rs 25500/MT. We expect pricesto move slightly upwards in the current fiscal. We have estimatedaverage international prices for companies to be ~ $620/MT (includinglanding and freight charges). Any volatile movement on either side wouldimpact our estimates.

Rising competition can impact circulation revenueMany national players are entering the regional space to tap newmarkets. Recent launches show that companies are also offeringattractive discounts to increase circulation and gain market share. Thismay reduce the attractiveness of regional markets and may also lead todelayed breakeven in new territories.

Failure of new businessesPrint media companies have entered new business segments like out-of-home (OOH), event management, radio, internet, retail, etc. Most of themare still in the investment mode. These domains are new and more of anexperiment for these companies. If these new ventures do not pay backas expected, it could be detrimental to print companies.


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Financials

Revenues to grow in double digitsAll three print media companies under the ICICIdirect.com universe

coverage are expected to show robust growth in revenues in thenear future. However, the growth would not be evenly and equallyspread for all three companies. Both Jagran Prakashan and DeccanChronicle are expected to post double digit growth in FY10E led bystrong demand in the regional advertisement space, while HT Mediawould grow at 7.5% (primarily led by growth in Hindiadvertisement) for FY10E. Nevertheless, all three companies areexpected to grow at a double digit CAGR over FY09-12E, backed byrobust growth in advertisement revenue.

We expect Jagran Prakashan to grow at a CAGR of 12.9% overFY09-12E with increasing spend in the regional ad space. DeccanChronicle is expected to post growth of 13.2% over the same

period, led by 11.1% CAGR (FY09-12E) in advertisement revenueand 32.0% CAGR (FY09-12E) in revenue from IPL. Growth in HTMedia would be relatively slow at 10.0% CAGR (FY09-12E) led bymoderate 8.8% CAGR (FY09-12E) in advertisement revenue androbust 27.0% CAGR in revenue from radio over FY09-12E.

Exhibit 27:Revenue growth

1,203 1,347 1,4481,613 1,792

895 9681,120

1,2531,403750

823930

1,0571,185

100

600

1,100

1,600

2,100

2,6003,100

3,600

4,100

4,600

FY08 FY09 FY10E FY11E FY12E

Rscrore


CAGR % (FY09-12E)

HT Media - 10.0%

Deccan Chronicle - 13.2%

Jagran Prakashan - 12.9%


EBITDA margin across companies to improveWe expect the margin across players to improve considerably asthe high cost newsprint is cleared out of the system. EBITDAmargins for both HT Media and Jagran Prakashan are expected tobe higher in FY10E than that in both FY08 and FY09. This would beachieved primarily due to declining newsprint prices and, to anextent, also due to reduction in SG&A expenses. Deccan Chronicleis also expected to improve its EBITDA margin considerably overthat in FY09. However, we expect the EBITDA margin to stabilise at~44% level and not go back to the earlier levels of ~61% in thenear future as the company would expand into new regions andinvestment in new businesses would take more time to pay off.

We expect Jagran Prakashan togrow at a CAGR of 12.9%. DeccanChronicle is expected to postgrowth of 13.2%. Growth in HTMedia would be relatively slow at10.0% CAGR (FY09-12E)


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Exhibit 28:EBITDA margin

20.6%19.7%18.8%

6.5%14.1%

31.0%

44.8%44.8%

43.9%

61.4%

32.8%31.6%29.7%19.0%21.9%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%




PAT margin to exhibit a similar trendThe PAT margin is also expected to exhibit a similar trend acrossplayers. With increasing EBITDA margin, the PAT margin is alsoexpected to expand handsomely for all companies under theICICIdirect.com print media universe.

Exhibit 29:PAT margin

34%

8%

0.1%8% 10%

11%

27%

15%

28%26%

13%11%

18% 19%20%

0%

5%

10%

15%

20%

25%

30%

35%

40%



[


We expect the margin acrossplayers to improve considerably

as the high cost newsprint iscleared out of the system.EBITDA margins for both HTMedia and Jagran Prakashan areexpected to be higher in FY10Ethan that in both FY08 and FY09.

The PAT margin is also expectedto exhibit a similar trend acrossplayers. With increasing EBITDA

margin, the PAT margin is alsoexpected to expand handsomely for all companies under theICICIdirect.com print mediauniverse.


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Valuations

With higher income levels in non metros and consumption shifting to

smaller towns and villages, advertisers have started to focus on non-

metro towns and allocate higher budgets to non-metro advertising.

Consequently, companies with a focus on regional advertisement have

been more resilient to the slowdown. They have been able to post

handsome growth in advertisement revenues, while their national

competitors have witnessed a decline in revenues.

We expect the current trend to continue for a while and players like

Jagran Prakashan, which cater to regional demand, would continue to

command a premium over national players.

We are initiating coverage on HT Media with a REDUCE rating. Deccan

Chronicle with the highest margin among print companies and

additional contribution from IPL franchise is our top pick in the sector

and we are initiating coverage with STRONG BUY rating. We believe,Jagran Prakashan, being dominant in the regional space would

continue to post robust growth. We reiterate our BUY rating on the

stock.

HT Media (REDUCE); P/E based Target Price: Rs 125The stock has historically traded at a very high one-year forward P/Emultiple of above 40x. However, with increasing newsprint prices,hardening competition with launch in new markets, tough operatingconditions and deteriorating margins, the one year forward P/E multiplefor HT Media had fallen to as low as 10x. With dismal ad revenue growth

of -0.5% in H1FY10 for HT Media as compared to 17.2% for JagranPrakashan (which is a regional player), we think the higher multiplecompared to Jagran Prakashan is unjustified. Given the slow ad revenuegrowth expectation for the near future, we value the stock at a 10%discount to Jagran Prakashan.

At the CMP of Rs 138, the stock is trading at 26.2x FY10E EPS of Rs 5.3and 19.9x FY11E EPS of Rs 6.9. We value the stock at 18x (~10%discount to Jagran Prakashan) FY11E EPS to arrive at a target price of Rs125. This implies a downside of 9.0% over the current price. We areinitiating coverage on HT Media with a REDUCE rating.

Deccan Chronicle (STRONG BUY); SOTP based Target Price: Rs 186The stock has historically underperformed its peers and has traded at a~40-50% discount to Jagran Prakashan. However, with balance sheetconcerns fading, the stock has appreciated and is now trading at ~30%discount to Jagran Prakashan. Possible stake sale in Deccan Chargers ordivestment of Odyssey Retail could further help unlock value.

We value the company (ex-IPL) at 13x (~35% discount to JagranPrakashan) FY11E Ex-IPL EPS of Rs 12.9 to arrive at a value of Rs 168 pershare.

We value IPL at 2.0x franchise fee of Rs 428 crore (25% discount to theRajasthan Royals Deal) to arrive at an enterprise value of Rs 941.6 crore

for Deccan Chargers. Adjusting for net debt of Rs 385.5 crore we get theIPL valuation of Rs 18 per share.


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Our SOTP target price of Rs 186/share discounts FY11E consolidated EPSof Rs 13.2 by 14.1x. This implies an upside of 23.0% over the currentprice. We are initiating coverage on Deccan Chronicle with an STRONGBUY rating.

Jagran Prakashan (BUY); P/E based Target Price: Rs 134At the CMP of Rs 119, the stock is trading at 21.5x FY10E EPS of Rs 5.5

and 17.8x FY11E EPS of Rs 6.7. We value the stock at 20x FY11E EPS toarrive at a target price of Rs 134. This implies an upside of 12.0% over thecurrent price. We reiterate our BUY rating on the stock.

Exhibit 30:Historical P/E MultiplesFY07 FY08 FY09 FY07 FY08 FY09

HT Media 43.0 39.8 1,504.3 43.7% 46.8% 7935.7%

Deccan Chronicle 20.2 13.0 8.1 -32.5% -52.2% -56.7%

Jagran Prakashan 29.9 27.1 18.7 0.0% 0.0% 0.0%

Historical P/E Discount/Premium to Jagran


Exhibit 31:One-year forward P/E chart

0

10

20

30

40

50

60

Apr-06

J

ul-06

Oct-06

Ja

n-07

Apr-07

J

ul-07

Oct-07

Ja

n-08

Apr-08

J

ul-08

Oct-08

Ja

n-09

Apr-09

J

ul-09

Oct-09

HT Media Deccan Chronicle Jagran Prakashan Source: Company, ICICIdirect.com Research

EV/EBITDA based Valuation

HT Media; Target price: Rs 135On an EV/EBITDA basis, we are assigning a multiple of 10x (~10%discount to Jagran Prakashan) to the company to arrive at a target price

of Rs 135. This implies downside potential of 2.0% over the currentmarket price.

Deccan Chronicle; Target price: Rs 175On an EV/EBITDA basis, we are assigning a multiple of 7.2x (~35%discount to Jagran Prakashan) to the company to arrive at a target priceof Rs 175. This implies an upside potential of 15.0% over the currentmarket price.

Jagran Prakashan; Target price: Rs 137On an EV/EBITDA basis, we are assigning a multiple of 11.0x to thecompany to arrive at a target price of Rs 137. This implies an upside

potential of 15.0% over the current market price.


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Exhibit 32:One year forward EV/EBITDA chart

0

10

20

30

40

50

60

Apr-0

6

Jul-06

Oct-06

Jan-0

7

Apr-0

7

Jul-07

Oct-07

Jan-0

8

Apr-0

8

Jul-08

Oct-08

Jan-0

9

Apr-0

9

Jul-09

Oct-09



Exhibit 33:Comparative valuationsYear End Mar 31 HT Media Deccan Chronicle Jagran PrakashanCurrent Price (Rs) 138 152 119

Rating REDUCE STRONG BUY BUY

Price target 125 186 134

Implied upside (%) -9 23 12

Valuation

FY09 P/E 3,566.3 26.1 39.2

FY10E P/E 26.2 14.3 21.5

FY11E P/E 19.9 14.1 17.8

FY09 EV/EBITDA 39.0 11.9 22.3

FY10E EV/EBITDA 12.7 6.5 12.0

FY11E EV/EBITDA 10.7 5.5 9.4

CAGR (%) Growth rates (FY09-12E)

Revenue 10.0 13.2 12.9

EBITDA 61.3 28.0 35.4

PAT 510.7 39.2 37.4

EPS 510.7 39.2 37.4

Profitability

EBITDA Margin (%), FY10E 18.8 44.8 29.7

EBITDA Margin (%), FY11E 19.7 43.9 31.6

% Change in Margin 5.0 -2.0 6.6 Source: Company, ICICIdirect.com Research


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ICICIdirect|Equity Researchzz

Analysts Name


Sales & EPS trend

0

500

1000

1500

2000


Rs

crore

0

2

4

6

8

10

Rs

Sales (LHS) EPS (RHS)

Stock Metrics

Bloomberg Code HTML.IN

Reuters Code HTML.BO

Face value (Rs) 2

Promoters Holding 68.8%Market Cap (Rs cr) 3,230.0

52 week H/L 143 / 36

Sensex 16974

Average volumes 44,460 Comparative return metrics

1M 3M 6M 12M

HT Media 10.0 33.5 110.6 130.6

Deccan Chronicle 2.8 54.7 173.2 254.1

Jagran Prakashan 7.9 20.0 123.4 146.4 Price Trend

0

50

100

150

200

250

300

Apr-0

7

Jul-07

Oct-07

Jan-0

8

Apr-0

8

Jul-08

Oct-08

Jan-0

9

Apr-0

9

Jul-09

Oct-09

Close price

November 18, 2009 | Media

Initiating Coverage

HT Media (HTMED)

Near term pain for ad revenue growthHT Media has transformed itself into an integrated media house withpresence in English, Hindi and financial dailies and radio. Though strongn its home turfs, it is facing stiff competition in new territories The adrevenue growth has been drab in H1FY10 and may take some more timeto pick up. Owing to these concerns, near term financial performance isexpected to be dull. We expect the top line to grow at 10.0% CAGRFY09-12E) and PAT at a 510% CAGR (FY09-12E) primarily due to small

base in FY09, where company reported a PAT of only Rs 0.9 crores.Cognizant of near term dullness in profitability and recent run up in thestock, we are initiating coverage on HT Media with REDUCE rating.

Regional advertisement the next growth driverAd contributes about 84% of the top line of HT Media. Out of the totalprint ad revenue of Rs 1129.9 crore in FY09, regional or Hindi adcontributed ~Rs 247 crores. Total ad revenue has grown at a 13.8%CAGR (FY07 09), while the Hindi ad has grown at ~25.3% CAGR.Led by increasing literacy rate and rising demand of print medium inTier II and III cites and town, regional ad is set to grow unabated.Growing at 20.7% CAGR (FY09-12E), we expect the Hindi ad tospearhead HT Medias print revenue growth from Rs 1129.9 crore inFY09 to Rs 1456.1 crore in FY12E, implying a 8.8% CAGR. We expectHindi ad share in total ad revenue to increase to 30% by FY12E.

Hindustan Going strongThe company has strong presence in major Hindi markets and plansto enter Rajasthan and MP at a later date. Hindustan has 15 editionsspread over Bihar, Jharkhand, UP, Delhi and Punjab. It enjoys anumero uno position in Bihar and Jharkhand, while it is a strong No.2in the Delhi region. With regional ad CAGR of 20.7% (FY09-12E) andincreasing circulation on back of entry into new territories, Hindustanis set to outpace the growth in English daily.

ValuationsAt the CMP of Rs 138, the stock is trading at 26.2x FY11E EPS of Rs 6.9.Given negative ad growth in H1FY10 and bleak outlook for the near future,we value the stock at 18x (~10% discount to Jagran Prakashan) FY11E EPS.Our target price of Rs 125 implies a downside of 9.0% over the current

price. We initiate coverage on HT Media with a REDUCE rating.

Current PriceRs 138

Target PriceRs 125

Potential upside-9%

Time Frame12 months

REDUCE

xhibit 34:Key FinancialsYear-end March) FY07 FY08 FY09 FY10E FY11E FY12E

et Profit (Rs crore) 97.0 101.3 0.9 123.3 162.5 206.3

hares in issue (in crore) 23.4 23.4 23.4 23.4 23.4 23.4

PS (Rs) 4.1 4.3 0.0 5.3 6.9 8.8

% Growth 4.4 (99.1) NA 31.8 26.9

ER (x) 33.3 31.9 3,566.3 26.2 19.9 15.7

rice / Book (x) 4.2 3.8 3.8 3.3 2.8 2.4

V/EBITDA (x) 18.9 19.2 39.0 12.7 10.7 8.5

oE (%) 12.7 11.9 0.1 12.7 14.3 15.4

oCE (%) 13.4 10.5 1.6 13.9 15.7 18.4

ource: ICICIdirect Research


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Company Background

HT Media Ltd is one of Indias foremost media companies and home tothree leading newspapers in the country in English, Hindi and businesssegments Hindustan Times (English daily), Hindustan (Hindi daily) andMint (business daily). Hindustan Times was started in 1924 and has morethan 80-year history as one of Indias leading newspapers.

The company also has four FM radio stations Fever 104 in Delhi, Mumbai,Bengaluru and Kolkata. It has also made a foray into the internet spacethrough its subsidiary Firefly e-Ventures Ltd and launched a new jobportal www.Shine.com. These are in addition to the existing websiteslivemint.com and hindustantimes.com.

In addition, the company has entered into a 51:49 joint venture (JV) withGerman media group Hubert Burda to leverage HT Media's expertise inprinting and publishing and capture opportunities in the booming high-

end magazine and catalogue printing space in India and the Asia-Pacificregion. HT Media also publishes two Hindi magazines Nandan andKadambini.

Exhibit 35:About HT Media


Exhibit 36:AchievementsYear Achievements

1924 The company inaugurated its flagship paper Hindustan Times.

1936 The Hindi daily Hindustan was launched, which remains the dominant newspaper in the core Hindi belt of

northern India.

1960 The Hindi literary magazine Kadambini was launched.

2004 HT Media Ltd was listed as a public company and attracted external funding

2005 Hindustan Times successfully entered the Mumbai market with a refreshingly new product and content mix.

2006 Fever 104 FM is launched, in technical collaboration with the Virgin Group. Hindustan was re-launched re-

establishing the company's prominent presence in the regional news space.

2007 Mint, the business paper in partnership with the Wall Street Journal was launched in Delhi and Mumbai. In the

internet space, Hindustantimes.com was re-launched and Livemint.com was introduced.

2008 Firefly e-Ventures, an HT Media Company launched its first portal for job seekers, Shine.com; and a social

networking website Desimartini.com. HT Media also entered the Mobile space with 54242 in partnership with

velti.com

2009 Entered into 51:49 joint venture with Bruda International for third party printing.


HT MEDIA

HT MEDIA Ventures HT Music &

Entertainment HT Burda Media Ltd DHT Digital MediaHoldings Ltd Firefly e-VenturesLtd HT Mobile SolutionsLtd51:49 JV 100%99.27% 75.0% 100%

Shareholding pattern (Q2FY10)

Shareholder % holding

Promoters 68.8

Institutional investors 26.1

Other investors 2.2

General public 2.9 Promoter & Institutional holding trend (%)

69% 68% 69% 69%

26% 26% 29% 29%

0%

20%

40%

60%

80%

Q2FY10 Q1FY10 Q4FY09 Q3FY09

Promoter Holding Institutional Holding

100%


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Exhibit 37:HT Media - Present in major English and Hindi markets


Exhibit 38:Readership of editions (in 000s)Areas HT Hindustan Mint

Delhi 2202 1414 146

Bihar 75 4336 -

UP/Uttrakhand 246 2314 -

Jharkhand 58 1253 -Mumbai 548 - 26

Kolkata 31 4 15

Bangaluru - - 15

Chennai - - 15

Total India readership 3494 9303 220 Source: Company, IRS 2009 R1, ICICIdirect.com Research

Exhibit 39:Revenue break-up for FY09 (Rs crore)Others*, 30.1

Advertisement

Revenue, 1,133.5

Circulation, 154.0

Radio, 29.0

Advertisement Revenue Circulation Radio Others* * others include revenue from job work, sale of waste paper



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Investment rationale

Regional advertisement the next growth driverAdvertisement contributes about 84% to the total topline of the

company. Out of the total print advertisement revenue of Rs 1129.9crore in FY09, regional or Hindi advertisement contributed about~Rs 247 crore. Total print advertisement has grown at a CAGR of13.8% over FY0709, while Hindi advertisement has grown at aCAGR of 25.3% over the same period.

Also, the share of Hindi ads is constantly increasing. It has increased from 18% in FY07 to about 22% in FY09 signifying reducingdependence on the English segment. The companys focus onexpansion in the Hindi belt would further aid the growth in regionalad revenue. Hindustan has recently launched a Bareilly edition,further consolidating its position in the UP and Uttarakhand region.

Led by increasing literacy rate and rising demand of print medium inTier II and III cites and town, regional ad is set to grow unabated.Growing at 20.7% CAGR (FY09-12E), we expect the Hindi ad tospearhead HT Medias print revenue growth from Rs 1129.9 crore inFY09 to Rs 1456.1 crore in FY12E, implying a 8.8% CAGR. Weexpect Hindi ad share in total ad revenue to increase to 30% byFY12E.

Exhibit 40:Hindi-English ad ratio

82% 80% 78% 73% 71% 70%

18% 20% 22% 27% 29% 30%

0%

20%

40%

60%

80%

100%


English Hindi


Hindustan Going strongHindustan, the Hindi news daily of the company, is the third largestread newspaper in the country. It has a strong leadership position inBihar and Jharkhand, with a huge gap between it and the nearestcompetitor.

We expect Hindi ad share in totalad revenue to increase to 30% byFY12E.


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Exhibit 41:Hindustan - Present in major Hindi markets


Exhibit 42:Share of Hindi in print ad revenue

English Daily

45%

Regional Daily

23%

Magazines

7%

Business Daily

6%

UP & Uttrakhand 31%

Hindi Daily19%

Rajasthan 17%

Punjab 10%

Others 5%

M.P. 17%Delhi 10%

Bihar & Jharkhand 10%

Print ad market of Rs 10800 crore (FY08) Hindi ad market - Rs 2000 crore



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Exhibit 43:Hindi ad revenue growth

157203

247312

374434

29%

16%20%

26%

22%

0

100

200

300

400

500


Rs

crore

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

Hindi ad revenue Growth %


Hindustan has 15 editions spread over Bihar, Jharkhand, UP, Delhiand Punjab. It enjoys the numero uno position in Bihar andJharkhand, while it is a strong No.2 in the Delhi region. With therecent launch of the Bareilly edition and setting up of printing facilitythere, the company has further consolidated its position in the UPregion. According to the latest IRS survey, total readership ofHindustan stands at 93.0 lakh. Out of top four Hindi dailies,Hindustan is the only newspaper that has managed to increase itsreadership in all the last four rounds of IRS.

Exhibit 44:Average issue readership2007 R2 2008 R1 2008 R2 2009 R1

Dainik Jagran 165.0 163.8 162.9 160.7

Dainik Bhaskar 128.2 128.3 130.0 128.8

Hindustan 85.5 87.5 92.1 93.0

Amar Ujala 80.8 80.9 80.7 81.8

In lacs

Source: IRS R12009, ICICIdirect.com Research

The company has increased its focus on the Uttar Pradesh region.Out of the total Hindi print advertisement market of approximatelyRs 2000 crore, UP is expected to have a share of about Rs 700 crore.The company has invested heavily in building its brand in this regionand is expecting to reduce the gap between itself and the secondmost read Hindi newspaper Amar Ujala in UP. Long-term plans of

the management include entry into Rajasthan and Madhya Pradeshin the future.

The Hindi newspaper market offers huge opportunities for growth.This is evident from the recent strategy shift wherein themanagement has decided to de-merge the operations of Hindustaninto a separate subsidiary. This would enable the company toincrease its focus on the higher growth Hindi newspaper segment.

We do not expect the English newspaper industry to increasesignificantly in volume terms. Some companies would fare betterthan others led by differentiated marketing strategies. Nevertheless,

it would be more of a zero sum game in terms of volume growth.Major growth in this segment would be a result of price increase.However, in the Hindi newspaper segment, a large market is still

we expect the Hindi ad tospearhead HT Medias printrevenue growth from Rs 1129.9crore in FY09 to Rs 1456.1 crorein FY12E, implying a 8.8% CAGR.

Out of top four Hindi dailies,Hindustan is the only newspaper

that has managed to increase itsreadership in all the last fourrounds of IRS.


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untapped. With increasing literacy rates and improving purchasingpower we believe the overall pie of the Hindi newspaper readingpopulation is set to grow at a fast pace.

HT Media offers better quality of news and has a superior look and feel compared to its competitors. It is set to benefit from bothincreasing industry size of Hindi newspaper and also from the higher

demand of quality content with increasing purchasing capacity insmall towns and villages.

Exhibit 45:Average readership in Bihar

48.745.5 43.8 45.6 43.4

5.3 5.0 4.2 3.7 2.8

24.4 26.027.6

25.1 24.1

0

10

20

30

40

50

60

2007 R1 2007 R2 2008 R1 2008 R2 2009 R1

In

Lacs

Hindustan Dainik Jagran Amar Ujala


Exhibit 46:Average readership in Jharkhand

11.1 10.911.6 12.2

12.5

9.1 9.7 9.29.8

8.0 8.5 7.9

10.1

7.98.7

0

2

4

6

8

10

12

14

2007 R1 2007 R2 2008 R1 2008 R2 2009 R1

In

Lacs

Hindustan Prabhat Khabar Dainik Jagran

Source: C IRS R12009, ICICIdirect.com Research

Exhibit 47:Average readership in Delhi17.0 17.3 16.6

15.4 15.7

7.9 8.49.5

12.6

9.7 9.2 8.67.3 7.7

11.0

0

2

4

6

8

10

12

14

16

1820

2007 R1 2007 R2 2008 R1 2008 R2 2009 R1

In

Lacs

Navbharat Times Hindustan Prabhat Khabar


Exhibit 48:Average readership in UP99.7

94.2 91.6 91.9 91.4

62.861.761.460.864.5

22.3 20.4 23.121.921.5

0

20

40

60

80

100

120

2007 R1 2007 R2 2008 R1 2008 R2 2009 R1

In

Lacs

Dainik Jagran Amar Ujala Hindustan


Hindustan Times second largest English dailyHT Medias flagship newspaper Hindustan Times is the secondlargest English daily in the country after The Times of India. Thecompany has a widespread presence in major parts of the country.It has a significant presence in Delhi, Bihar, Kolkata and certain partsof Uttar Pradesh. The company has also extended its presence inseveral areas of Punjab, Haryana and Mumbai in the recent past. Ithas also revamped its offerings in the English segment with variousnew supplements.


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The company now has a presence in both leading markets of Delhiand Mumbai, which together account for more than 57% of thecountrys print advertisement revenue. These two marketscontribute about 60% of the total English revenue of HT Media.

Exhibit 49:Break-up of total print ad revenue

English Daily, 45%Hindi Daily, 19%

Magazines, 7%

Business Daily, 6%

Regional Daily, 23%

57% - Contributed by Delhi &

Mumbai

43%- Other markets


Exhibit 50:Top 5 most read English newspapers (In 000s)Paper 2008 R1 2008 R2 2009 R1

The Times of India 6,790 6,710 6866

Hindustan Times 3,276 3,522 3494

Hindu 2,244 2,121 2235

Deccan Chronicle 1,225 1,152 1093

Telegraph 1,009 1,018 1083

Source: IRS R1 2009, ICICIdirect.com Research

Exhibit 51:English ad revenue growth

716811 882 860

929 1,022

13%10%

8%9%

-2%0

200

400

600

800

1,000

1,200


Rs

crore

-4.0%

-2.0%

0.0%

2.0%4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

English ad revenue Growth %


English ad revenue de-grew 7.8%in H1FY10 due to shrinking adbudgets of the national leveladvertisers led by slowdown inthe economic activity, we expectEnglish ad to decline by ~2% in

FY10E to Rs 860.3 crore. Withnegative growth expected inFY10E, we expect this segment topost a CAGR of 5.0% over FY09-12E to Rs 1022.1 crore.


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English ad revenue grew at 11.0% CAGR (FY07-09) to Rs ~882.2crore. Although the company has a strong presence in Delhi and isconsolidating in markets of Punjab and Mumbai, we do not expectEnglish segment to grow at a rapid pace in the near future. With a degrowth of 7.8% in H1FY10 due to shrinking ad budgets of thenational level advertisers led by slowdown in the economic activity,We expect English ad to decline by ~2% in FY10E to Rs 860.3 crore.

With negative growth expected in FY10E, we expect this segment topost a CAGR of 5.0% over FY09-12E to Rs 1022.1 crore.

Delhi Sustaining market share, albeit intense competition persistsHindustan Times has strengthened its position and consolidated asthe most read English daily in Delhi. It has surpassed its closestcompetitor The Times of India (TOI) in two consecutive rounds ofIRS. Out of Hindustan Times total readership of 63.4 lakh, HT Delhiaccounts for ~32% (19.9 lakh) of the total readership.

Although the company has surpassed TOI in the recent past, it isworth noting that the superior performance is not attributed to the

strong show by HT as much as it is to the below-par performance byTOI. TOI is still a close second with an average issue readership of19.4 lakh. We expect the company to continue its strongperformance in the Delhi region, while TOI would continue to be atough competitor.

Exhibit 52:Average readership in Delhi

1907

1862

20111991

21342113

1935 1954

1700

1750

1800

1850

1900

19502000

2050

2100

2150

2200

2007 R2 2008R1 2008R2 2009R1

In

000

's

HT TOI


Gaining market share in MumbaiHT Media launched its flagship newspaper Hindustan Times inMumbai in 2005. Back then, TOI had a complete monopoly in theEnglish segment and enjoyed higher cover price and premiumadvertisement rates. However, with subscription based discountschemes, continuous improvement in product offerings and strongbrand positioning, HT has achieved a strong No.4 position withaverage readership of 5.48 lakh and a market share of 20% inMumbai. The company has been able to continuously increase itsreadership in the city while that of TOI is on a decline.

Moreover, given its presence in both Delhi and Mumbai, HindustanTimes has been able to garner a better advertisement share than itsclosest competitor DNA in Mumbai. We expect the Mumbaibusiness to strengthen further and achieve operational break-even

Hindustan Times hasstrengthened its position and

consolidated as the most readEnglish daily in Delhi. It hassurpassed its closest competitorThe Times of India (TOI) in twoconsecutive rounds of IRS.


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by FY12E. The delayed break-even can be attributed to substantialdiscounts offered on cover price and advertisement rates, coupledwith the economic slowdown in the last fiscal year.

Exhibit 53:Average issue readership in Mumbai

381

622538

737

526673

480

873

548705

479

1571

1533

865

1520

0

200

400

600

800

1000

1200

14001600

1800

HT Media TOI DNA Mid-Day Mumbai Mirror

In

000

's

2008R1 2008R2 2009R1

44%

-3%

13%

-11%

17%


Mint Gaining momentumHT Media launched a business daily Mint in association with TheWall Street Journal in February 2007. The company entered thehighly competitive business paper market. According to themanagement, within a short period of its launch, Mint has grown tobecome the No.2 business daily in the key cities of Delhi, Mumbaiand Bengaluru. Strategies adopted by the company in terms of lowintroductory pricing, clean design and printing quality andcontextual content environment have yielded desired results. Thecompany has witnessed high growth in readership of Mint. It hasalso recently launched Mint in Bengaluru, Kolkata and Chennai.

Although Mint has made a quantum leap in average readershipsince the time it was launched in 2007, it would continue to facetough competition from The Economic Times and DNA. Both thesedailies are far ahead of it in terms of readership in IRS 2009 R1.

Mint reported a topline of ~Rs 35 crore in FY09. We expect Mint tobreak-even by the end of FY11E.

Exhibit 54:Average issue readership (In lacs)2008R1 2008R2 2009 R1

Economic Times 7.43 7.52 7.83

Mint 0.51 1.39 1.75

Hindu Business Line 0.91 0.77 0.77


Hindustan Times is gainingtraction in Mumbai. AIR for theMumbai edition grew ~44% overthe last two rounds of IRS. Thecompany has re launched itspaper in Mumbai in July 09,which could further improvereadership of HT in Mumbai.

Although Mint has made a quantumleap in average readership since thetime it was launched in 2007, it wouldcontinue to face tough competition

from The Economic Times and DNA.Both these dailies are far ahead of it interms of readership in IRS 2009 R1.


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Exhibit 55:Business daily - ad revenue (~Rs 600 crore)

ET , 60%

BS, 13%

Mint , 5%

Others , 22%


Circulation to inch up going forwardCirculation revenue has grown from Rs 139.7 crore in FY07 to Rs153.1 crore in FY09 registering a two year CAGR of 4.7%. This wasachieved primarily on back of launch of both Hindi and English dailyin new territories and launch of business daily Mint.

However, it is worth noting that the number of copies sold per yearhas increased from 86.4 crore in FY07 to 101.1 crore in FY09,registering a two year CAGR of 8.2%. This highlights the aggressivepricing policy adopted by the company to gain inroads in the newterritories and increase the readership of its publications.

However, going forward we expect the company to increase coverprice in the markets where it has gained market share resulting in12.5% CAGR (FY09-12E) in circulation revenue to Rs 217.8 crore ledby 6.2% CAGR (FY09-12E) in number of copies sold per year to121.0 crore copies. Major circulation increase would be seen inHindustan and Mint, while Hindustan Times is expected to register anominal growth.

Exhibit 56:Circulation to inch up going forward

140 149 153188 205

86 96 101

218

121

114106

22.9%

9.2%

2.1%

6.6%

2.8%

6.0%

0

50

100

150

200

250


0%

5%

10%

15%

20%

25%

Circulation revenue (Rs crore) No. of copies sold (RHS) Revnue growth (%)


Company posted revenue of Rs 35crore from Mint in FY09. Mint hasbeen gaining momentum and isexpected break-even at the end ofFY11E. Mint commands ~5% of thetotal business ad market of ~Rs 600crore.

We expect the company toincrease cover price in themarkets where it has consolidatedmarket share, resulting in 12.5%CAGR (FY09-12E) in circulationrevenue to Rs 217.6 crore led by6.2% CAGR (FY09-12E).


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RadioHT Media forayed into the radio business in 2006 in collaborationwith UK-based Virgin Radio under the brand name Fever 104. Theradio business was earlier operated through its 75% subsidiary, HTMusic and Entertainment. It was recently demerged and is nowoperated under the parent company (HT Media).

Unlike the other major players, HT Media acquired licenses for onlythe four major cities of Delhi, Mumbai, Bengaluru and Kolkata, whichtogether account for more than 50% of the radio ad market.Consequently, the company has performed much better than itsnational counterparts. Fever 104 is expected to break even by theend of FY10E, while other players like Sun TV, which operates about44 radio stations all over India, is far from breaking even.

HT Media paid a license fee of Rs 75 crore, which would be equallywritten off over a period of 10 years. It enjoys No.2 position in Delhi,while it has 7% market share in Mumbai and Bengaluru. It has a 9%share in Kolkata.

Exhibit 57:Market share in MumbaiRadio City,

18%

Big FM, 16%

Red FM, 17%Radio Mirchi,

15%

AIR FM2-Gold,

11%

Fever FM, 7%

Radio One, 7%

Others, 9%

Source: RAM, ICICIdirect.com Research

Exhibit 58:Market share in DelhiRadio Mirchi,

26%

AIR FM2-Gold,

16%

Radio City,

10%

Fever FM, 11%

Red FM, 9%

Radio One, 8%

Big FM, 7%

Others, 13%


Exhibit 59:Market share in Bengaluru

Big FM, 27%

Radio Mirchi,

19%AIR FM1-

Rainbow, 10%

S FM, 10%

Radio One, 8%

Radio City, 8%

Fever FM, 7%

Others, 11%


Exhibit 60:Market share in Kolkata

Radio Mirchi,

20%

Big FM, 19%

Friends FM,

14%

Fever FM, 9%

Amaar FM, 9%

Red FM, 9%

Meow FM, 7%

Others, 13%


The company operates 4 radio

stations under brand name Fever104 and enjoys no.2 position in 3of the areas where it operates.We expect this segment to reporttotal ad revenue of ~Rs 39.7crore for FY10E.


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During the last fiscal, the radio business reported 54% YoY growthin airtime sales. We expect the company to report ~36.9% YoYgrowth in the current fiscal. Radio advertisement revenue forH1FY10 stood at Rs 18.6 crore. We expect the radio to report totalad revenue of ~Rs 39.7 crore for FY10E. On the EBIT level, itreported a loss of ~Rs 4.9 crore in H1FY10.

Online ventures Still in investment modeThe company views the online segment as a high growth potentialsegment and has invested heavily into various online ventures. Ithas re-launched its portals www.hindustantimes.com andwww.livemint.com in FY08 with significant improvement in featuresand functionality. These news portals continue to make strides in theonline news segment with 25 million page views per month forhindustantimes.com and 8 million page views per month forlivemint.com.

Shine.Com, a complete career portal, has earned the distinction of

registering 2.2 million candidates within its first year of operations. Ithas gained higher acceptability due to its patented matchingtechnology combined with world class design, salary benchmarking,privacy, anonymity protection and other career related content andtools that make this website unique in India.

The company also owns the social networking site DesiMartini.com,which is operated through its newly formed wholly-ownedsubsidiary Firefly e-Ventures Ltd.

These segments are still in the nascent stage and would remain ininvestment mode in the near future.

Exhibit 61:Unique Visitors on English news online portals

Source: Statsaholic.com, ICICIdirect.com Research


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Exhibit 62:Unique Visitors on English business news online portal

Source: Statsaholic.com, ICICIdirect.com Research

JV Yet to commence operationsThe company has entered in 51:49 joint venture with Germany-based media group Hubert Burda to set up third party publishingoperations. This JV has been formed to cater to the booming high-end magazine and catalogue printing space in India and the Asia-Pacific region. The operations under this JV would commence fromQ3FY10E onwards. We have not included revenue from this JV inour valuations.

The news portals continue tomake strides in the online newssegment with 25 million page

views per month forhindustantimes.com and 8 millionpage views per month forlivemint.com.


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Risks & concerns

In addition to the industry wide risk discussed above, HT Media also facesthe following concerns:

High competition in English news segmentThe company has been able to maintain its position as the most readEnglish newspaper in the NCR in the last two IRS rounds and is alsogaining market share in the newly launched Mumbai market. However,TOI is a close second in Delhi and has a huge lead in the Mumbai market.HT Media may have to reduce its cover price and advertisement rates incase TOI resorts to aggressive marketing to regain its lost market share.This would be detrimental to the operating performance of the company.

Expansion in UP regionThe company has a stronghold in the Jharkhand and Bihar region andholds the No.2 position in Delhi. However, it is facing tough competitionfrom both Dainik Jagran and Amar Ujala in UP. Although the company isaggressive and has gained commendable market share in UP, gainingfurther inroads may prove difficult. This would delay the break-even in theUP market.


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Financials

Major revenue growth beyond FY10ETopline for the company grew by 15.7% in FY08 and 11.9% in FY09

to Rs 1346.6 crore, implying a healthy CAGR of 13.8% during FY07-FY09. The company exhibited laggard growth in H2FY09 owing tolow ad revenue, affected by the slowdown in the economy and theglobal financial crises and discount led circulation strategy in newterritories.

The company has still not recovered fully from the economicslowdown, with revenue growing only 3.7% in H1FY10 as comparedto 18.5% in H1FY09 and 5.5% in H2FY09. Nonetheless, with theimproving economic scenario, companies with a regional focushave posted good revenue growth. We expect even national playersto get back to their earlier trajectory post FY10E. In FY10E, weexpect the company to register modest revenue growth of

7.5%YoY. Major increment in revenue would be visible duringFY11E, driven by increasing penetration and higher ad revenuegrowth, which we expect will grow at ~11.3% YoY. We expect thecompany to report revenue CAGR (FY09-FY12E) of 10.0% to Rs1792.0 crore in FY12E, led by 20.7% CAGR in Hindi ad revenue and12.5% CAGR in circulation revenue over the same period.

Exhibit 63:Revenue growth1792

16131448

1203

1347

11.4% 11.1%11.9%

7.5%

15.7%

0

200

400

600

800

1000

12001400

1600

1800

2000

FY08 FY09 FY10 FY11 FY12

Rs

Crore

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Advertisement Revenue Circulation Radio Others* Growth %

FY09-12E CAGR of 10.0%

*Others include Job work, sale of waste paper, revenue from JV and other operating income


Exhibit 64:Revenue break-up (Rs crore)FY07 FY08 FY09 FY10E FY11E FY12E CAGR% (09-12E)

Advertisements 874.9 1,012.9 1,133.5 1,173.1 1,305.3 1,459.1 8.8

Airtime Sales 1.9 18.8 29.0 39.7 48.9 59.4 27.0

Sale of publications 136.2 149.9 154.0 189.0 206.5 219.0 12.5

Others* 26.6 21.6 30.1 46.2 52.7 54.9 22.1

Total 1,039.7 1,203.3 1,346.6 1,448.0 1,613.5 1,792.5 10.0

* Job work, Sale of waste paper, Revenue from JV and other operating income


We expect the company to reportrevenue CAGR (FY09-FY12E) of10.0% to Rs 1792.0 crore inFY12E, led by 20.7% CAGR inHindi ad revenue and 12.5%CAGR in circulation revenue overthe same period.


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Margins back to higher levelsThe economic crises led declining revenue growth coupled with risein newsprint prices dented the margins of print media companiesduring FY09. Both domestic and international newsprint prices havepeaked in FY09 due to rise in crude prices and increased demandfrom US and China during Q2FY09. The major impact was, however,felt in H2FY09 as companies generally stock about three months of

raw material.

About 70% of HT Medias raw material consumption is met byimported newsprint. Average newsprint price for the companyduring FY09 stood at Rs 34,334/MT as compared to Rs 27,598/MT inFY08. Newsprint peaked in Q2FY09 and started cooling off at theend of Q3FY09, resulting in dented margins in the last three quartersof FY09.

The high cost inventory has been cleared out of the system. On astandalone basis, the company reported EBITDA margin of 19.7% inH1FY10 as compared to 16.1% in H1FY09 and 13.3% in H2FY09. We

have estimated the average newsprint cost at Rs 30,931 for FY10E.We expect the company to report EBITDA margin of 18.8% at theend of FY10E.

Exhibit 65:Newsprint assumptionsFY07 FY08 FY09 FY10E FY11E FY12E

Copies sold / day (mn) 2.4 2.6 2.9 2.9 3.1 3.3

% increase 11.4 11.5 0.3 7.5 6.0

Pages/copy 32 33 31 32 33 33

Total newsprint (MT) 130,927 153,447 147,109 141,767 149,675 157,085

% increase 10.3 17.2 -4.1 -3.6 5.6 5.0

Blended rate (Rs/MT) 31,045 27,598 34,334 30,931 30,564 31,396

% increase 14.3 -11.1 24.4 -9.9 -1.2 2.7

Newsprint cost (Rs Cr) 407 424 505 439 457 493

Ink, store & spare (Rs Cr) 26 32 35 38 42 45

Total Raw Material (Rs Cr) 432 456 540 476 500 539

% increase 26.6 5.5 18.5 -11.8 4.9 7.7


Exhibit 66:EBITDA and PAT margin

14.1%

6.5%

19.7% 20.6%18.8%

11.3%9.9%

8.4%

0.1%

8.1%

0%

3%

6%

9%

12%

15%

18%

21%

24%


EBITDA Margins PAT Margins


About 70% of HT Medias rawmaterial consumption is met byimported newsprint. Averagenewsprint price for the companyduring FY09 stood at Rs34,334/MT as compared to Rs

27,598/MT in FY08.

We have estimated the averagenewsprint cost at Rs 30,931 forFY10E. We expect the companyto report EBITDA margin of 18.8%at the end of FY10E.


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PAT margin for FY09 stood at 0.1%, as compared to 8.1% in FY08.Lower revenue growth coupled with higher interest cost and lowerother income dented the PAT margin. On the back of higher revenuegrowth, better operating performance and lower interest cost, weexpect the company to report PAT margin of 8.4% for FY10E. Weexpect lower interest expense on account of loan repayment to helpPAT margin expand to 11.3% in FY12E.

Return ratiosRoCE during FY09 reached the lowest levels of ~0.1%, induced byhigh cost inventory led dismal operating performance. Withimprovement in macroeconomic conditions and increasing visibility,we expect RoE and RoCE of 13.9% and 12.7%, respectively, forFY10E. Going forward, return ratios are expected to improve further.

Exhibit 67:RoE and RoCE

12.7%14.3% 15.4%

11.9%

0.1%

18.4%

10.5%

1.6%

13.9%15.7%

0%

3%

6%

9%

12%

15%

18%

21%


RoE RoCE


RoCE during FY09 reached the

lowest levels of ~0.1%, inducedby high cost inventory led dismaloperating performance. Withimprovement in macroeconomicconditions and increasingvisibility, we expect RoE andRoCE of 13.9% and 12.7%,respectively, for FY10E.


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Valuations

The stock has historically traded at very high one year forward P/Emultiples of above 40x. However, with increasing newsprint prices,hardening competition with launches in new markets, tough operatingconditions and deteriorating margin, the one year forward P/E multiple forHT Media had fallen to as low as 10x. With dismal ad revenue growth of -0.5% in H1FY10 for HT Media as compared to 17.2% for JagranPrakashan (which is a regional player), we think such high multiples areunjustified. Given the slow ad revenue growth expectation for the nearfuture, we value the stock at a 10% discount to Jagran Prakashan.

The EPS in FY09 had fallen to Rs 0.04 due to exceptionally high newsprintprices and low revenue growth owing to slowdown in the advertisementindustry. However, going forward, we expect the margin to improve sincethe high cost inventory has been cleared out of the system. We alsoexpect growth of 8.9% (CAGR of FY09-12E) in consolidated

advertisement revenue resulting in overall revenue growth of 10.0% overthe same period. The EPS is expected to grow to Rs 8.8 by FY12E.

P/E based valuation of Rs 125/ share

At the CMP of Rs 138, the stock is trading at 26.2x FY10E EPS of Rs 5.3and 19.9x FY11E EPS of Rs 6.9. We value the stock at 18x (~10%discount to Jagran Prakashan) FY11E EPS to arrive at a target price of Rs125. This implies a downside of 9.4% over the current price. We areinitiating coverage on HT Media with a REDUCE rating.

Exhibit 68:One year forward P/E chart

0

50

100

150

200

250

300

350

400

Apr-

06

Aug-

06

Dec-

06

Apr-

07

Aug-

07

Dec-

07

Apr-

08

Aug-

08

Dec-

08

Apr-

09

Aug-

09

Rs

Price PER 50 PER 40 PER 30 PER 20 PER 10 Source: Company, ICICIdirect.com Research

EV/EBITDA based valuation of Rs 135/ share

On an EV/EBITDA basis, we are assigning a multiple of 10x (~10%discount to Jagran Prakashan) to the stock to arrive at a target price of Rs135. This implies downside potential of ~2.0% over the current marketprice.


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Exhibit 69:EV/EBITDA valuationEV/EBITDA

FY11 EBITDA Rs crore 318.2

EV/EBITDA multiple x 10.0

Target EV Rs crore 3,181.6

Target Market Cap Rs crore 3,152.5

Number of Equity Shares Crore 23.4Target Price per Share Rs 135

Upside Potential -2.4% Source: Company, ICICIdirect.com Research

Exhibit 70:One year forward EV/EBITDA chart

0

1,000

2,000

3,0004,000

5,000

6,000

7,000

8,000

Apr-

06

Aug-

06

Dec-

06

Apr-

07

Aug-

07

Dec-

07

Apr-

08

Aug-

08

Dec-

08

Apr-

09

Aug-

09

EV

(R

s

Cr)

EV 25x 20x 15x 10x 5x



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Profit and loss statement(Rs Crore)

(Year-end March) FY07 FY08 FY09 FY10E FY11E FY12E

Net Sales 1,039.7 1,203.3 1,346.6 1,448.0 1,613.5 1,792.5

% Growth 15.7 11.9 7.5 11.4 11.1

Raw Material cost 435.2 464.0 558.9 493.6 518.4 555.9

% of Sales 41.9 38.6 41.5 34.1 32.1 31.0

Employee Expense 159.6 198.3 241.9 264.5 307.8 328.1

% of Sales 15.4 16.5 18.0 18.3 19.1 18.3

Administrative and Other Expenses 277.1 370.8 458.0 417.5 467.5 537.6

% of Sales 26.7 30.8 34.0 28.8 29.0 30.0

(Increase)/Decrease in inventories (0.3) 0.3 (0.1) 0.6 1.6 1.8

% of Net Revenue (0.0) 0.0 (0.0) 0.0 0.1 0.1

Total Expenditure 871.6 1,033.4 1,258.7 1,176.2 1,295.3 1,423.4

% Growth 18.6 21.8 (6.6) 10.1 9.9

Op Profit 168.0 169.9 87.87 271.9 318.2 369.0

% Growth 1.1 (48.3) 209.4 17.0 16.0

Other Income 36.7 43.9 33.0 23.5 29.0 32.0

Depreciation 43.6 57.0 68.8 77.8 86.9 96.1

EBIT 124.4 112.9 19.1 194.0 231.3 273.0

% Growth (9.3) (83.1) 917.7 19.2 18.0

Interest 14.3 17.8 32.3 34.1 27.7 14.6

Exceptional Items 0.0 - 18.9 4.5 - -

Profit before Tax 146.8 139.0 0.9 178.9 232.5 290.4

Taxation 54.6 37.7 12.5 55.6 70.0 84.1

Less: Losses adjusted against goodwill 0.3 - (0.2) - - -

Add: Share of Minority Interest in Losses 4.6 (0.0) 12.7 - - -

Net Profit 97.0 101.3 0.9 123.3 162.5 206.3

% Change YoY 4.4 (99.1) NA 31.8 26.9


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Balance sheet(Rs Crore)


Liabilities

Equity Share Capital 46.8 46.9 47.0 47.0 47.0 47.0

Reserves & Surplus 717.4 806.0 801.5 924.8 1,087.4 1,293.7

Secured Loans 165.0 220.8 369.9 419.9 339.9 139.9

Unsecured Loans 0.8 2.3 0.8 0.8 0.8 0.8

Current Liabilities & Provisions 211.3 280.4 539.9 383.5 439.7 501.7

Others 31.81 12.21 13.71 -1.61 -16.93 -32.25

Total Liabilities 1,173.0 1,368.5 1,772.8 1,774.3 1,897.7 1,950.7

Assets

Gross Block 500.1 561.4 672.5 824.9 897.0 960.1

Less Accumulated Depreciation 108.1 145.2 195.3 252.5 315.9 384.4

Net Block 392.0 416.2 477.1 572.4 581.1 575.6

Capital WIP 18.8 58.9 194.6 100.0 80.0 50.0

Total Fixed Assets 410.9 475.2 671.7 672.4 661.1 625.6

Net Intangible Assets 109.8 107.8 100.0 98.0 87.4 76.8

Investments 229.3 265.6 303.5 303.5 303.5 303.5

Recoverable Welfare Trust 21.7 - - - - -

Loans & Advances 34.6 106.4 216.7 181.0 225.9 250.9

Cash 115.0 77.4 70.5 88.0 89.9 139.1

Trade Receivables 148.5 198.3 219.9 256.2 318.5 319.9

Inventories 103.2 115.5 175.6 159.3 193.6 215.1

Other Non Current Assets - 22.3 14.8 16.0 17.8 19.8

Total Current Assets 401.3 519.9 697.6 700.4 845.7 944.8

Misc expenses written off 0.1 0.1 0.0 0.0 0.0 0.0

Total Assets 1,173.0 1,368.5 1,772.8 1,774.3 1,897.7 1,950.7


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Ratios


Per Share Data (Rs)

EPS 4.1 4.3 0.0 5.3 6.9 8.8

Cash EPS 6.0 6.8 3.0 8.6 10.6 12.9

Book Value 32.6 36.4 36.2 41.5 48.4 57.2

Operating Profit Per Share 7.2 7.3 3.8 11.6 13.6 15.8

Operating Ratios

Operating Margin (%) 16.2 14.1 6.5 18.8 19.7 20.6

Net Profit Margin (%) 9.0 8.1 0.1 8.4 9.9 11.3

Return Ratios

RoE (%) 12.7 11.9 0.1 12.7 14.3 15.4

RoCE (%) 13.4 10.5 1.6 13.9 15.7 18.4

Dividend yield (%) 5.1 6.8 5.1 5.1 5.1 5.1

Valuation Ratios

EV/EBITDA 18.9 19.2 39.0 12.7 10.7 8.5

PE 33.3 31.9 3,566.3 26.2 19.9 15.7

EV/Sales 3.1 2.7 2.5 2.4 2.1 1.8

Sales to Equity 1.4 1.4 1.6 1.5 1.4 1.3

Market Cap to sales 3.1 2.7 2.4 2.2 2.0 1.8

Price to Book Value 4.2 3.8 3.8 3.3 2.8 2.4

Turnover Ratios

Fixed Assets Turnover Ratio 2.5 2.5 2.0 2.2 2.4 2.9

Debtors Turnover Ratio 7.7 6.9 6.4 5.6 5.6 5.6

Creditors Turnover Ratio 5.8 5.4 3.5 3.3 4.3 4.3

Cash to Absolute Liabilities 1.9 1.9 1.3 1.8 1.9 1.9

Debt/Equity 0.2 0.3 0.4 0.4 0.3 0.1

Current Ratio 1.9 1.9 1.3 1.8 1.9 1.9

Quick Ratio 1.4 1.6 1.2 1.6 1.7 1.6

DuPont analysis(%)

FY07 FY08 FY09E FY10E FY11E FY12E

PAT / PBT 66.1 72.9 102.0 68.9 69.9 71.0PBT / EBIT 118.0 123.1 4.7 92.2 100.5 106.4

EBIT / Sales 12.0 9.4 1.4 13.4 14.3 15.2

Sales / Assets 108.1 110.6 109.2 104.1 110.7 123.7

Assets / Equity 125.9 127.6 145.3 143.1 128.5 108.1

RoE 12.7 11.9 0.1 12.7 14.3 15.4


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Annexure 1:

De- Merger of Hindi business

The Board of Directors of HT Media Limited (HTML) approved thesale/transfer of its Hindi Business Undertaking to Hindustan MediaVentures Limited, a subsidiary company, of which 99.3% is owned byHTML. The transaction shall be effective from December 1, 2009.

As part of this transaction, the Hindi business of HTML comprising ofHindustan, the Hindi daily; Hindi magazines, Nandan & Kadambini, andthe internet portals of these publications, including all assets, liabilitiesand employees pertaining to this business, will be transferred toHindustan Media Ventures Limited on a slump sale and going concernbasis. The transfer will be on Book Value of the business as onNovember 30, 2009.

The lump-sum cash consideration towards the proposed sale would beRs. 149 crore including net working capital of Rs. 24 crore. The net

working capital shall however be adjusted and transferred as per theactual books of accounts audited by the Statutory Auditors, as on 30thNovember, 2009.

The management would start reporting numbers separately for both theentity from second half of FY11E. We have not valued the Hindi businessseparately.


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