Got it. The management has 1 more quarter in that sense. I think they did mention that they are seeking a board approval for their plans and they should announce something in this quarter. Let’s hope they do.
I would rule out a higher dividend payout as the group in general doesn’t like giving dividends. You can check HT Media’s Dividend payout as well.
True that, its just that they’ve indicated that they’d keep a certain level of cash and payout the rest. And its possibly one of the reasons why they’re not rated at the levels of Jagran and DB 
Vivek Khanna, CEO addressed the call.Highlights by Capital Mkt;
For the quarter ended March 2015, HMVL registered a 10% growth in sales to Rs 202.09 crore.Company saw 10.3% increase in advertising revenue to Rs 146.6 crore primarily due to increase in both advertising yields & volumes.It saw 11.7% increase in circulation revenue to Rs 50.8 crore due to higher circulation and higher net realization per copy.OPM jumped 380 basis points to 22.0%. Thus OP grew 33% to Rs 44.45 crore.Employee cost grew 22.1% to Rs 26.5 crore due to impact of new hiring, increments and a charge for regulatory compliance.Net profit grew 43% to Rs 38.94 crore.In FY 2015 sales grew 12% to Rs 818.58 crore.OPM fell from 20.7% to 20.3%. Thus OP grew 10% to Rs 166.49 crore.Raw materials costs grew 12.3% to Rs 337.4 crore led by increase in both newsprint consumption & costs.Employee costs grew 23.4% to Rs 106.8 crore due to impact of new hiring, increments and a charge for regulatory compliance.Net profit grew 27% to Rs 140.86 crore.
Bihar and Jharkhand grew in single digits. UP and Uttrakhand have grown in double digits and Delhi has grown 10%.Company has grown faster than the market in sales and net profits despite an increase in structural costs and a difficult operating environment.Revenues from UP and Uttrakhand were 37%, Bihar was 32% and Jharkhand was 10-11%.Hindustan’ has a strong regional presence and enjoys a leadership position in Bihar, Jharkhand and Uttarakhand whilst consolidating its 2nd position in Delhi and UP.
FY 2015 saw the company cement its number two position in Uttar Pradesh and Delhi, even as it retained leadership positions in Uttarakhand, Bihar and Jharkhand by a wide margin.UP and Uttrakhand are largest market for Hindi newspapers followed by Bihar and Jharkhand.Hindustan is the second largest Hindi Daily as per 2014 IRS Results. Its 2014 IRS Readership on all India basis grew from 14.25 million to 14.75 million. In UP it grew from 7.2 million to 7.6 million.In Uttrakhand it grew from 0.43 million to 0.53 million. In Bihar it grew from 4.27 million to 4.38 million.Delhi NCE grew marginally from1.06 million to 1.07 million.Jharkhand fell from1.40 million to 1.31 million.
Strategy of IT technology up gradation is over. The company started later than some of its competitors but has been corrected.In CY,Co will take initiatives for digital phase like launching few things this year.
Future strategy will be to offer vernacular space in digital media.Free cash flow generated is Rs 162 crore in FY 2015.The company is hoping to use the cash as soon as possible.Due to its improved performance the management is confident that it will continue to outperform the market in the coming year.
Net cash stands at Rs 543.1 crore.In FY 2015 advertising revenue increased 12.5%; Circulation revenue increased by 12.6%.
Going forward the company hopes to drive both volumes and yields across geographies on the back of strong IRS results.It will focus to increase local coverage and consolidate position in the geographies of presence by improving reach.Hindi Print media will continue to grow for two years.Government, FMCG, Education and Auto are its major customers and account for 55% of its revenues.
Thanks again @hemantbhatia
There are still no signs on how the company plans to use its cash, which is a bit of a worry given their earlier commitments
Disl - Invested
Thanks a ton Hemant for diligently sharing the concall updates as always. Few additional points from my notes taken during concall.
Any one has con-call details. They are announcing their quarterly results today.
Con- call details for HMVL are below. The call is @ 4 PM Today.
Good results from the company, I would say. Revenue growth a bit tepid, but good increase in the margins, PAT this quarter @ ~19%
02239600894 / 02267468394
Vivek Khanna, CEO add the call.Highlights of the call by Capital Mkt
For the quarter ended June 2015, HMVL registered a 6% growth in sales to Rs 223.72 crore.The company saw 7% increase in advertising revenue to Rs 166.2 crore primarily due to increase in advertising volumes being partially off-set by drop in yields (base inflated due to election impact in Q1 last year).It saw 8.3% increase in circulation revenue to Rs 53.40 crore due to higher circulation and higher net realization per copy.OPM jumped 390 basis points to 24.4%. Thus OP grew 27% to Rs 54.50 crore.PBT grew 23% to Rs 57.80 crore and net profit grew 23% to Rs 41.71 crore.Good performance came due to good performance in Uttarakhand, Bihar and UP.Underlying growth in advertising was around 15-16% if adjusted for elections revenues and government revenues that did not come due to code of conduct last year.The company has started the year on a positive note despite predictions of a weak monsoon and subdued rural economic growth.June 2015 quarter’s performance was according to plans, and the company saw a healthy growth in operating revenue and profitability.
Operations in Uttar Pradesh and Uttarakhand continues to drive growth in advertising and profitability.The company has further strengthened its already dominant leadership positions in Bihar and Jharkhand despite a higher intensity of competition.The management believes that the company is in a good position to continue its growth momentum in the year ahead as it reaps the benefits of its past investments.Raw material cost fell 2.3% during the quarter to Rs 84.8 crore.Employee cost fell 3.1% during the quarter to Rs 28.7 crore. This is expected to increase by 11% in the coming quarters.Net Cash stands at Rs 576 crore.PAT margins grew from 15.2% to 17.7%.Its 2014 IRS Readership on All India basis stands at 14.75 million against 14.25 million as per 2013 IRS Readership.
Going forward the company hopes to drive both volumes and yields across geographies especially in UP, on the back of strong IRS results.Its 2014 IRS Readership for UP stands at 7.6 million against 7.2 million as per 2013 IRS Readership.‘Hindustan’ has a strong regional presence and enjoys a leadership position in Bihar, Jharkhand and Uttarakhand whilst consolidating its 2nd position in Delhi and UP.2014 IRS Readership for Uttarakhand stands at 0.53 million against 0.43 million as per 2013 IRS Readership.2014 IRS Readership for Bihar stands at 4.38 million against 4.27 million as per 2013 IRS Readership.
Advertising revenues accounted for 70% of sales in June 2015 quarter against 71% in June 2014 quarter.
Circulation revenues accounted for 22% of sales in June 2015 quarter against 23% in June 2014 quarter.
It will focus to increase in local coverage and consolidate position in the geographies of presence by improving reach.There is potential to increase cover price in UP and Jharkhand.The management is confident that it will perform well in the coming quarters. The company expects to grow at double digits going forward.Local versus national revenues will be 47:53 against 44:56 sometime back. The company gradually brought up local revenues.The company is looking for organic growth but is also actively looking out for acquisitions.The company has few inorganic opportunities and have kept organic expansion on hold.Government advertising is doing well but it has benefit of lower base due to code of conduct last year.FMCG has done extremely well.Banking and finance have also done well.E-commerce is small but looks promising.Auto industry is also seeing good growth.The company gets on average 6% of advertisement revenues thru classifieds. But they are higher in Bihar, Jharkhand and UP.
Capex will be normal in FY 2016.Latest outlook on the monsoon is not as grim as the previous one. The latest indication that the management got today is of normal rainfall. This would help the company.
Few more points to Hemant’s notes
Hi, I have a 5% of my portfolio in HMVL. Keen to add more…All seems good except one concern where I want help of fellow members. Readership and advt revenues in mid to long term will shift to online.
1). Online and digital advt is increasing rapidly :
a. It allows direct marketing to the exact target customer
b. It allows even smaller firms such as a startup or an SME to carve out a advt and marketing budget and reach out to target audience.
2). With increasing penetration of smart phones, lowering of internet costs, increase in net speed…more and more people will switch to online for news and reading…Even in rural areas…This will further have a negative impact on ad revenues for HMVL…
I am from Bhopal (tier ii) city and live in mumbai (metro) and have stopped my newspapers couple of years ago and switched to “curated” content available through twitter, google alerts, etc.
In my ancestral town in MP, the last municipal elections were fought as much on facebook as in offline world with both main candidates uploading their contact “schedule” during election campaign, uploading several pics of the campaign programme and acitivites on facebook on daily basis. Teenagers in my family as well as my relatives in age group of 50 are clued to facebook.
I think it is not long before majority of advt revenues will shift to online as against print and HMVL.
I see this as a major disruption that will impact HMVL in medium to long term.
Pls share your counter thoughts on above to help me evaluate this critically
thanks for your valuable inputs
Going through AR additional 325 Cr have been invested in multiple Mutual Funds. Is there any way to make sure this cash invested is for real? The company may show other income in next year result. But this can keep more cash piling before bubble burst.
What’s the questions exactly here?
Hi Rohit,
My question is is there any way to make sure other than trusting management to know if the 325Cr cash which have been invested in Mutual funds is for real?
Well they have given the names of the funds in which they have invested. It’s tough to cook it up.
Also they have reputed auditors. The business is generating a lot of cash and that can be validated as they ramp up margins in UP. Which you can check by listening to calls of competitors.
Thanks Rohit,
Cant understand idea behind taking 98Cr debt and putting cash in funds.
Hi,
Need help understanding.
PFA image FY 15 Cash flow. The income from investment, bank deposit under cash flow from operating activities is 50.64 Cr where as under investing activity 12.30 Cr.
I can understand that this income should be removed from operations because cash flow from operation means income from business related activities and this income is then added in cash from investing. But why this difference of 38Cr?
Hi Sunil
thanks for pointing out this accounting mismatch. In my view, though i might be wrong, may be some of these income is clubbed with ‘sale/maturity of investments’. though I have never seen such a thing before.
Best
Rajat
Hi Sunil,
I just browsed through HMVL 2015 AR. Thanks for pointing out the discrepancy. I think it might be because a large chunk of their investments are in bond and treasury plans with maturity > 365 days (approximately > 50% of total). This are shown under fixed maturity plans. This leads them to account for income owing to accrual method but not recognise in cash flows until investments are redeemed.
Additionally it may also be possible that interest may be accrued on investments but not yet received in cash. This is similar to the case of liquid mutual funds that offer bonus units rather than investments. In these cases the holder gets higher and higher units of the liquid funds at the same NAV but no interest income can be recognised as per accounting standards until those units are sold. For instance, you started with invested in 100 units at a NAV of 10 (total 1000). At the end of the year, you get 8 bonus units (total 108). NAV is still 10 but total unrealised amount is 1080 (108 X 10). But as per accounting standards it may not be possible to recognise income of Rs 80 from these bonus units units they are sold. (This part is speculation at my end)
That being said the discrepancy does appear to be a bit steep but nothing I would be too worried about as of now.
Disc: Invested
Owner of HINDUSTAN,LARGEST NEWSPAPER IN BIHAR, JHARKHAND. SECOND LARGEST IN UP. Hindustan ranks as the second largest-read daily in the country.
Hindustan has 4 editions and 113 sub editions across the Hindi belt. They are spread across Delhi, Bihar (Patna, Muzaffarpur and Bhagalpur), Jharkhand (Ranchi, Jamshedpur and Dhanbad), Uttar Pradesh (Lucknow, Varanasi, Meerut, Agra and Kanpur) and Chandigarh. Apart from these, the paper is also available in key towns like Aligarh, Mathura and Allahabad.
The stock is trading at PE, which is lower than its peers than Daini Bhasker and Jagran Prakashan. So in that sense this is a good value media pick because along with its synergies with HT Media it is able to sustain growth over a longer period of time
Fastest growing, in readership and profitability:
Hindustan, the Hindi daily of HMVL, is the second-largest daily in India (IRS-2014), growing by 25% through 2010-2014. HMVL’s EBITDA has grown 14.85% CAGR through FY11-FY15, significantly outperforming peers. HMVL has also registered significant gains in the UP market in IRS-2013, which provide for a strong long-term growth engine for the company. It can be note that UP market is the largest Hindi advertising market, and management expects that readership growth can enable growth of 2-3x in revenues from Uttar Pradesh.
UP & Uttarakhand (UK) to act as growth drivers for HMVL
HMVL’s readership in UP & UK grew at strong CAGR growth of 26% from 2.5 mn in 2009 to 8.1 mn in 2014 and entered into 2nd spot in UP following Dainik Jagran. With HMVL moving to 2nd spot in UP, which is the largest market for advertising industry with size of Rs.12 Bn, HMVL has started to increase the advertisement rates charged to companies LEADING TO EXPANSION IN MARGINS.
Hindi & Regional markets growing faster than the English markets
Literacy rate is one of the key factors behind the growth of Indian print industry. As literacy rate increases in Indian states, people tend to start reading newspapers as they get familiar with their regional language. Hindi and regional markets control 64% of Indian print Industry and likely to witness CAGR growth of 9.6% & 10.4% respectively. Print is the preferred mode for advertisers in India where companies spend 42% of total ad spends on print. Advertisers prefer print as it is better medium of reach to the non-metros, Tier-III and Tier-IV cities compared to digital & TV. Literacy rates in Hindi states are lower compared to national average which is expected to support growth. English market is likely to witness a slower CAGR of 5% compared to industry growth of 8%, on the back of shift towards digital media as the segment is catering mostly to big cities and metros where internet penetration and spending power is high.
Newsprint costs on decline
Newsprint is the major input and forms 51% of the company’s total expenses. With newspaper circulation declining in advanced economies on the back of shift towards digital, the demand for newsprint is on decline leading to cooling of newsprint costs. Further, transportation costs also to come down on the back of declining fuel costs. Newsprint prices have been coming off in the
last couple of years from $640 per ton in 2012 to $540 per ton in Q1FY15 according to karvy reasearch , As a result, raw material expenses as % of sales started to decline from 43% in FY12 to 41% in FY15.
Way to valuation convergence - growth, visibility, easy base to beat:
We believe HMVL shall register industry-beating revenue growth in the coming quartersenabled by strong growth in readership. Also, competitive intensity has begunto reduce in Jharkhand (strong growth in realization/ copy of DainikBhaskar). Lastly, on account of high employee expenses (Majithia Wage board) and promotional activity in Bihar (Patna launch of Dainik Bhaskar in 3QFY14), 3QFY14-2QFY15 have set up an easy to beat base. HMVL is set to register 35% growth in EBITDA in FY15-FY16 period, which will ensure earnings growth looks attractive in the coming quarters.
Near-term, earnings are likely to be well- supported by elections in key geographies further improving visibility:
HMVL will see elections in all of its key geographies in the next 24 months, starting with Bihar (3QFY16), and followed by Uttar Pradesh. The company’s earnings growth visibility, as well as industry - outperformance, is bolstered by these events.
PROS:
1.CONSTANTLY INCREASING OPM FROM 17.07 IN FY10 TO 20.33 IN FY15
NET PROFIT MARGINS INCREASE FROM 10.31 TO 17.20.
ROE INCREASE FROM 14% TO 19.19% and consistent free cash flow geneation.
MARKET CAP OF RS.1650 CR AND NET CASH OF RS 576CR.
BIHAR ELECTIONS ON ANVIL.
INSPITE OF GENERAL ELECTION ADSPENDS IN Q1FY15,
IT SHOWED A REMARKABLE INCREASE IN Q1FY16.
PROFIT INCREASED BY 23%.
DECREASING PRICE DIFFERENTIAL BETWEEN ADRATES OF ENGLISH AND HINDI NEWSPAPERS.
INREASING READERSHIP AND CIRCULATION REVENUE.
CONS:
NO SPECIFIC AGENDA FOR DEPLOYEMENT OF CASH HOARD.
VERY LOW DIVIDEND INSPITE OF HEALTHY CASH FLOWS.
THIS STOCK DESERVES A DEEP LOOK AS IT IS AVAILABLE ON PE OF 10-12.
MANAGEMENT
Mr. Vivek Khanna
Chief Executive Officer
Vivek Joined HT Media in 2008 after working for more than 16 years, of which 11 were spent with Hindustan Lever Limited (HLL). He led strategic and marketing initiatives - segmentation, positioning, advertising & new product development at HLL. In his last assignment he was Director Marketing with Aviva responsible for the Company’s product & marketing strategy. At HT Media Mr. Vivek Khanna set up the Ad for Equity (AFE) business. He ran the AFE business and Mint business for the last 5 years, growing these from small insignificant numbers to a strong & significant size.
He is the architect of current good shape in which HMVL is.
SHOBHANA BHARTIA
The media CZARINA. Owner of HT Group and daughter of late Mr. KK BIRLA.
disclosure: I currently have no stock position in the stock.
All seems positive and yet no stock position. Wondering what are your concerns 
