Jagran is also quoting at lower end of historical valuation band…but HMVL is much cheaper than u quote. Plus jagran has debt while HMVL has huge net cash B/S…For Jagran the positive would be if the losses from new ventures like ‘Nayi dunia’ come down which is expected in near term. But like for HMVL even for Jagran; DB Corp is entering in one of the key market…
Both look good but for HMVL risk reward is much more favourable.
Indian Readership survey results are out! Hindustan has jumped to second spot
_ "As
@Dhwanil
This was just brought to our notice._We should not post links to blogs/websites -_No such guideline exists.We must respect intellectual property, and credits must always given to original article)- when initiating/kick-starting a discussion from that.
The operating word is “discussion” using the linked article. Merely pointing to an external link - saying “here’s a summary of a book I reviewed” without even bothering to put up a synopsis for further discussion - is defeating the purpose of a Forum. Rather as some members have pointed out - that can be seen as indulging in blatant self-promotion. That is what was frowned upon!
We do not think we have advised again putting up blog links, ever - except in above context. There is no formal guideline put up on the same. Perhaps it is time we do!
Infact we have several investor/bloggers as ValuePickr members - Abhishek, Kiran, Neeraj Marathe, Yourself, Rohit Chauhan, and probably many more who are doing great independent service to the investor community. Original authors of articles at blogs/websites when using an article of theirs for discussion purposes - ARE entitled to a link to the original blog/article. You might have seen Ayush or Abhishek doing that. You may do the same, with discretion.
External Links are NOT discouraged. Let the readership decide on Quality. If the external link is useful, folks will spend time there. If not it will be ignored - market forces at work!
In summary, Links to blogs are welcome (keeping the above context in mind). Just like links to any external articles are welcome/desired - if it is seen as adding value to any ongoing discussion. The only caveat - a liberal policy for external links should not be mis-used for blatantly promotional activities.
As per Valuepickr guidelines, we should not post links to blogs/websites. Hence, I am reproducing a recent post almost verbatim on Hindustan media ventures limited.
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Thanks for clarifying the guidelines on posting links. Probably, it was a wrong inferences drawn by me from some of the remarks made on posting external links. I am sure members on this forum will use due discretion to take maximum advantage of this generous gesture by the Admin team.
"As limited. _
_ notice.We ** -No such guideline exists.We **_ article-
** The “discussion” **
** External Quality. **
HMVL has come out with very good set of numbers
Revenue grew to 189 crores in Q3 FY14 from 162 crore in Q3 FY13, growth of 16%
EBIDTA grew to 31.35 crores in Q3 FY14 from 23.2 crore in Q3 FY13, growth of 35%
PAT grew to 28.79 crores in Q3 FY14 from 20.81 crore in Q3 FY13, growth of 38%
YoY, EBIDTA margin expanded by 2.3% from 14.3 to 16.6%
However, on QoQ, EBIDTA margin contracted by 3.5% from 20.14% to 16.62%.
Looking at the kind of money Congress is spending (down the drain) on their ads on tv and print, it does look like the next six months will see some windfall gains for media. Shobhana being a congress loyalist and this being a dominant newspaper in the north, it should get a good share of the money.
I may be imagining things but the AAP is suddenly getting beaten up a lot more by media these days - wads of ad money is a good enough carrot for the media to start singing your tune.
While hindustan is merrily advertising their dominant position based on the readership survey, the rest of the newspapers have ganged up and called the survey absurd and want it withdrawn !
Vivek Khanna CEO of the company addressed the call.
Highlights of the call by Capital Mkt:
Total sales grew 18% at Rs 199.0 crore from Rs 168.5 crore.
Advertising revenues increased 16% to Rs 137.5 crore from Rs 118.2 crore primarily due to increase in advertising yields and volumes.
The company saw 18% increase in circulation revenues to Rs 45.9 crore from Rs 39.0 crore primarily due to higher realization per copy.
EBITDA increased by 35% to Rs 47.2 crore from Rs 35.0 crore primarily due to growth in advertising and circulation revenues.
Raw materials increased 22% to Rs 80.6 crore from Rs 66.3 crore to increase in newsprint price and consumption.
Employee costs grew 6% to Rs 21.8 crore.
The company saw increase in advertising and sales promotions expense.
The company’s pricing initiatives and improved traction in advertising revenues across markets have resulted in the highest ever top-line in any quarter.
The latest IRS results have been quite encouraging, with Hindustan emerging as the second largest Daily in the country. It is now a clear No.2 in Uttar Pradesh and No.1 in Uttarakhand, while maintaining dominance in Bihar and Jharkhand.
The management believes that Hindustan Media Ventures’ expansion strategy, combined with its healthy balance sheet, puts the company in a strong position to deliver sustained growth.
Realisation per copy rose from 1.8 from Q3 last year to Rs 2.11.
The company increased copies by a lakh.
The company’s past focus on UP and Bihar is now giving returns.
It is now number 1 in Bihar and Jharkhand. It has retained its position in Delhi.
Lead over number 2 player has gone up significantly in Patna.
Patna has seen close to 45% increase in number of copies sold.
Though there is confusion over the latest IRS survey results, the management feels it is more accurate method than what was done previously. In any case apart from one or two states, ranking has not changed much.
As far as the company is concerned latest IRs has shown appropriate reflection of its ranking in UP.
This time IRS survey was for around 30 minutes unlike one and a half hours so it is likely to get more accurate replies.
Bihar and Jharkhand continue to grow at a rate close to 16%. In UP growth rate is ahead of these two. Delhi has not grown due to election and real estate business.
The company expect its growth in UP to be in double digits. It has now dominant position in Patna, entire Bihar and UP. The company will continue to get good growth here.
The company did not get much revenue from the assembly election in Delhi. This is the first time it has happened so. Aam Aadmi Party did not use the print media but resorted to the radio and âmohalla’ and street meetings.
However it got ample business when the last time assembly election happened in UP and Bihar.
Political revenue (due to forth coming general election) was negligible in December 2013 quarter. It will have slight impact in March 2014 quarter but will have significant impact in march 2015 quarter.
The company is looking at both organic and inorganic growth opportunities and will come out with some news soon.
The company’s circulation in UP is just above 12 lakh.
Top sectors contributing to the sales are retail, fmcg, medical and DAVP. Real estate is slow.
Outlook
HMVL’s business outlook continues to look strong on the back of continuous readership growth to be fueled by strengthening brand and leveraging opportunities.
Increasing prosperity and rise in consumption in rural regions points towards a strong growth in advertising revenues.
The company has strong balance sheet (net cash of Rs 380.9 crore) capable of funding its expansion.
As indicated during the concall, HMVL is leveraging its rising circulation in UP and UT to increase its advertisement yield. HMVL increased ad rates effective Feb 2014. I did a small exercise to compare the increase taken by HMVL in three key markets i.e. UP/UT, Bihar and Jharkhand . I also included comparison with its largest competitors in each state to provide some idea as to the pricing power of HMVL in each of the territory.
Here is the link to the excel sheet
Following are some inference
)- In UP/UT HMVL is closing in swiftly with No. 2 player Amar Ujala in terms of ad rates. This seems to be result of latest IRS results and momentum gained by HMVL in these markets
)- In Bihar and Jharkhand, company has clearly retained its premium pricing derived from clear leadership in both these markets.
)- Average ad rates increase is of the tune of 30-40% (and much higher in large market of UP/UT). This when combined with volume growth and increased spend on political ads is likely to give very decent results in next couple of quarters.
Business momentum seems to be in favour and at current valuation, the business look very attractive.
Disclosure: 7% portfolio allocation at average price of 107.
Hi Dhwanil,
Thanks for sharing the ad rate comparison sheet andyour observations.
Here is a comparison of Dainik Jagran (latest) vs. Hindustan 2014 ad rates based on figures in the excel sheet.
| Display/Auc/Tender (Color) | Tenders/Contract | Political | First Page Price | Back Page Price | |
| UP/UT | 19% | 69% | 41% | 66% | 52% |
| Bihar | -21% | -15% | -17% | 12% | 2% |
| Jharkhand | -21% | -29% | -43% | 12% | 2% |
|
Vivek Khanna, CEO of the co add the call.Highlights of the call by Capital Mkt; The management is glad to close the year with a strong growth in revenue and profitability. While its pricing initiatives contributed to its top-line growth, its sustained cost control measures have ensured an increase in profitability despite rising input costs. Total revenue grew14% to Rs 760 crore. EBITDAincreased 29% to Rs 181.8 crore due to growth in advertising and circulation revenues. This year's performance also reaffirms Hindustan's dominance in Bihar and Jharkhand and its stature as the fastest growing daily in Uttar Pradesh and Uttarakhand. With a strong brand, growing readership, and healthy balance sheet, the management is confident that it will continue to deliver value to its shareholders and it will continue to grow revenues and profitability. The company relaunched Hindustan in Kanpur. Kanpur is one of the largest markets in UP. Because the company was lagging behind its competitors, it came out with relaunch. The management has seen strong first few weeks. It sees significant revenue opportunity in Kanpur. The company does not have any plans for relaunch in its existing markets for the next 6 months. UP business became profitable in FY 2014. Its strategy is to be number one in UP in coming months. UP market will continue to grow in margin. Last year UP incurred loss and FY 2014 it made profit. For next few years every year the UIP market should see 6-7% points increase in margins and the aim is to reach 25% margin in 3 years. Bihar and Jharkhand are also strong markets. Jharkhand, launch happened 4 years ago and it continues to be number one in Jharkhand and Bihar. Revenues recorded healthy double digit growth in Jharkhand and Bihar. Dainik Bhaskar coming in Patna has been inconsequential. It is a big player so the company has its strategy to maintain its position in Bihar market. Headroom for the company to grow in UP is significant; it can grow 200% looking at where the number one player is. The company is number one or two in 6-7 cities in UP readership wise. The company has doubled its efforts to look at inorganic expansion in MP, Chhasitgarh, Rajasthan and Punjab and Haryana, as it has cash of Rs 400 crore. In case if no opportunity arises then the management will re look at its strategy of using cash. If the company does not use its cash for organic growth in one year time, it will distribute it amongst the share holders The Board of Directors have recommended a dividend of Rs. 1.2 per equity share of Rs. 10 each; translating to 12 % of face value. Dividend for the year amounted to Rs 8.81 crore (excluding Dividend Distribution Tax). Political advertisement revenue was insignificant during the quarter. In Q1 of FY 2015 there has been political advertising and there has been loss of DAVP. Thus overall not much impact but certainly there is positive net gain. Advertisements from the auto and retail industry were good for the company. The company expects to deliver growth of last year in this year as well. The company does not have any long term borrowings and average borrowings should be same as last year. Newsprint price went up by 9% during FY 2014 against 13% due to the dollar impact. Newsprint price in FY15 is likely to be same as in Q4 unless dollar behaves unfavourably. The company undertook cover price increase in some markets of UP and Jharkhand. The average cover price has grown from Rs 1.85 during the start of the year to Rs 2.08 currently. Circulation should continue to grow in double digits in FY 2015. Markets with higher newspaper penetration are Rajasthan, Punjab, Haryana and Maharashtra. Free cash flow for FY 2014 was 84 crore and capex was Rs 40 crore. UP grew 20% + in FY 2014. For Q4 the trend was similar. Bihar and Jharkhand also had significant growth in advertisement revenue. |
The best thing for me in the conf call was that they somewhat gave a timeline on the use of the cash on the balance sheet…An announcement is expected within 6 months…It will be mostly an acquisition in one of the 3 markets they mentioned (One was Punjab, don’t remember the other two)…This is the biggest overhang on the stock and once the cash is utilized, I expect a minor PE re-rating…Hopefully the management lives up to its word…But safe play at current valuations, should continue to grow by 15% easily
Regards
HMVL has come out with decent set of numbers though nothing spectacular but as expected steady. My understanding on entry in to one of the three markets of Punjab-Haryana/ Rajasthan/ MP-Chaatisgarh is that it is part of organic growth plans and not the inorganic one. Some other interesting points from concall are
-The management has also increased efforts for acquisition (which I consider not too good as this may lead to desperation and some irrational decision on acquisition). It also confirmed that if by end of FY 15, the plans for inorganic growth do not materialize, the board will return back the cash. My understanding is that since HT media holds 75% in HMVL and hence buy-back is not an option. The only route left is paying out through dividend.
)- In UP, they have achieved breakeven this year as compared to small loss last year. Apparently, they had margin of 4% this year for UP operations. However, they expect UP market to achieve margins of mature market (25%) in 3 years leading to 7% margin expansion for UP operations in each of the next three years. This essentially means, on the overall basis, the margin will expand from here going forward.
)- HMVL is now no.1 or No 2 players in 7 out of 10 large cities in UP. This clearly means, they have trumped Amar Ujala by a margin in most of the markets and Dainik Jagaran in few markets. I feel, this gives them a critical mass to gain better ad rates from advertisers especially in current scenario where management indicated that No.1 player has ad rates almost 3 times that of them. Hence significant room for improvement.
)- Management also clearly indicated that, organic expansion into new market will be done so as to ensure that existing margin levels (of 20% ) are protected and only additional money will be deployed for expansion. This also means that the organic expansion will be largely funded through cash from operations while the cash on balance sheet shall be used for acquisition only.
Considering all this, I feel, even at current levels, it’s a good stock to look considering limited downside and if things pan out as projected and management walks the talk, there could be potential for decent re-rating if the overhang of cash on b/s is removed as management indicated.
On the concall, management has specifically mentioned that they will come out with organic or inorganic planswithin 6 to 9 monthsfor the appropriate usage of the cash on the books. If that does not happen, than they will announce special dividend for FY15 to return the cash to share holder.
Broken out Long term resistance level 150 and consolidating.
May shoot further up.
Discl. Not invested.
@Dhwanil,
Good pick yet again backed by superb in depth analysis. Thanks.
I think, It’s a very good pick on all parameters - right business, right management available at the right price. The management seems to be doing the right things to position the business to benefit from improved macro economic conditions.
One pertinent question in this kind of business is…can you kill the competition or competition will kill you? HMVL seems to be doing quite well here. What are your thoughts? Do we have more data points?
Apart from this, Is there any political connection of the management which could be a dampener going forward?
Disc: Invested
Hi Aksh,
In last 10 years, there is a shift in competitive dynamics of vernacular print media business. Earlier, vernacular/Hindi print media business used to be a monopoly or duopoly in most of the regions. However, due to some aggression shown by large groups like DB and Jagran, most of this markets have 3-4 players now. Hence, apparently the competitive intensity has increased. But still, it is an oligopoly business anyways.
Secondly, newspaper is a “habit” and to a large extent it is sticky! That is one of the reasons why it takes 5-7 years for a new entrant to establish its business! We have experienced it in Gujarat. Inspite of entry of the third player, the top players has still retained its position while the new players has taken the second place (After 8 years of its entry in market). Same thing has happened in UP for Hindustan. It took 5 years for it to reach near to second place and is still far behind the leader. The point is, it is very difficult to topple the market leaders. (another case in point, DB after 5 years is still player 4 in the Jharkhand market and Hindustan has remained topl players for years now).
Thirdly, this is a game where winner takes a large chunk of the business and commands huge premium. So the ad yield between leader and other players may be as high as 100-300% between first and second largest player and 400-500% between second and third player. So, as you scale up, the incremental gains and operating leverage is very high.
In this context, I think, HMVL is sitting very well with leadership position in two key markets Bihar and Jharkhand. And it will take some time, serious efforts and some major errors on HMVL part for DB to topple it from there even after next 4-5 years. So I do not see it as major competitive threat.
In UP, it has thwarted the no.2 position of AU successfully. this primarily happened because of AU’s lost focus and declining quality and Hindustan’s calibrated strategy on content. However, it is still far from closing in on Jagran and it may be like so for few more years. However, the mere scale up from No.2. to No.3. will give it enough operative leverage to improve its margin significantly.
Thus, I feel that HMVL is on sound footing both in terms of protecting itself from competition in Bihar/Jharkhand and thwarting the competition in UP/UT market.
Thanks Dhwanil for the lucid explanation and bringing in more clarity on the competition scenario. Even at No. 2, with operating synergies kicking in, they should do well if they can manage to scale up, which seems to be likely scenario with their well thought out READ (Regionalism, Expansion, Activation and Digitalization) strategy.
In a country like India, with a growing population and literacy rates, It’s a quality business to own. It’s a business with a pricing power. For local small ticket advertisements, It’s must. So as long as HMVL is among top 2-3 players, with right focus, it should do well.
Disc: Invested and may add on dips.
HMVL has come out with Q1 results today. Here is the link
http://www.bseindia.com/corporates/anndet_new.aspx?newsid=fba6673a-74a9-48b0-86d8-96b0d7e10bc0
Top line growth was decent at 17% while bottom line growth was subdued at 12%. There was quantum jump in newsprint prices and Employee cost both which dampened the bottom line. The hypothesis of UP/Uttarakhand operations gaining critical mass and momentum seems to be playing out.
Interestingly, company has sought approval from shareholders to raise loan in excess of paid up capital plus reserve. This may be an indication of advance discussion on one of the larger inorganic growth opportunity fructifying especially considering that HMVL is sitting on cash of 420 crores.
Awaiting more clarity from conference call on the same.
Discl: Invested at avg. price of 107 with 10% portfolio allocation.
This stock is extremely undervalued compared to its peers. Below are the daily readership data and the stock valuations (Source-Indian Readership Survey(IRS) 2013 data)-
1.Jagran Prakashan Ltd (Dainik Jagran-15.526 million copies daily) Trailing P/E=17.7 , P/B=3.6
_2). HMVL (__Hindustan-14.245million copies daily) :_Trailing__P/E~10.5 (after June Quarter results) , P/B~1.8
3). DB Corp (__Dainik Bhaskar)- 12.855 million copies daily) :_Trailing_P/E=19.5 , P/B=5.55
Source -http://en.wikipedia.org/wiki/List_of_newspapers_in_India_by_readership
And if one sees, the readership of HMVL has increased from 2012 to 2013 and for its competitors, it has decreased. And as Dhwanil mentions, HMVL has net cash of abt 420 Cr which is massive. Link to the FY15 Q1 results http://www.bseindia.com/xml-data/corpfiling/AttachLive/Hindustan_Media_Ventures_Ltd_210714_RSt1.pdf
Having actually read the newspaper, its layout etc also looks impressive to me.
The stock looks quite attractive to me.
Disc: I hold (just arnd 3.5% as of now) and will look to increase the allocation to abt 8-10%.
Another favorable thing is the shareholding pattern -
Arnd 9.6% is free float, promoters own ~75% and Foreign n Domestic Institutions own ~15%.
