CONFERENCE CALL - from Capital Markets
Hindustan Media Ventures
Volumes grew significantly due to Bihar election and festival spending
Hindustan Media Ventures held conference call on 27 January 2016 after it declared its December 2015 quarter results.
Vivek Khanna, CEO of the company addressed the call
Highlights of the call:
For the quarter ended December 2015, HMVL registered a 16% growth in sales to Rs 240.89 crore. OPM jumped 560 basis points to 25.0%. Thus OP grew 50% to Rs 60.07 crore. PBT grew 32% to Rs 63.00 crore. Net profit grew 28% to Rs 46.86 crore.
For the nine months ended December 2015, HMVL registered a 12% growth in sales to Rs 691.03 crore. OPM jumped 430 basis points to 24.1%. Thus OP grew 37% to Rs 166.63 crore. PBT grew 35% to Rs 183.51 crore. Net profit grew 31% to Rs 133.60 crore.
During the quarter the company saw 19.2% increase in advertising revenue to Rs 181.20 crore primarily due to increase in advertising volumes.
It saw 6.3% increase in circulation revenue to Rs 54.2 crore due to higher circulation and higher net realization per copy.
The management was pleased to report another quarter where revenue growth was faster than the industry’s.
Growth was powered by a good festive season that fuelled advertising spends across most sectors, state elections in Bihar as well as its internal initiatives.
The management hopes to continue with the good performance for the rest of the year.
Benign raw material prices and operational efficiencies contributed to higher profitability
Growth in advertising and circulation revenues being off-set by a 25.3% increase in employee costs on account of impact of annual increments and hirings and 31.4% increase in sales & promotion costs to support Haldwani launch and higher revenue in the quarter.
Most of the circulation growth was led by Bihar election. However, underlying growth in Circulation revenues of about 14-15% continues.
For the future the company will continue driving both volume and yield growth across geographies on the back of improving economic environment.
The management feels that UP will continue on its growth trajectory and drive margin expansion.
The company will also focus on growing adoption of the new Hindustan app launched in January’2016.
The company continued to build on the momentum of the previous quarters, strengthening its presence in Uttar Pradesh and Uttarakhand while retaining its dominant market position in Bihar and Jharkhand.
The management is confident that the steps it is taking to move to the next level of growth will continue to deliver value to shareholders
Jharkhand and Bihar combined grew at 16%.
6 months ago the company had dropped prices in Bhagalpur and Muzzfarpur. Now the company is getting back to old prices. That is why circulation expansion in revenues was just 6% during the quarter.
Elections in Bihar, full festival season in December 2015 quarter compared part of it in Q3 December 2014 quarter led to increase in volumes.
Auto Banking and finance and education have been the growth category.
Underline growth (despite Bihar election and adding back of DAVP due to code of conduct) is 14-15%.
The newsprint prices have fallen and the company has seen 3% benefit in margins due to this.
Newsprint is expected to be stable in coming few months but dollar increase can hurt the players.
When there are slow down in economy, companies cut down in advertising. But in 2010 when there were strong economic headwinds rural economy was not much impacted. Thus for the immediate future double digit growth is certainly possible.
For yield on the commercial advertising the company is higher than Amar Ujala but it continues to trail behind Dainik Jagran and this would continue to be so for some more time.
Average realization on copies its 2.15-2.18 per copy. As per revenue per copy the company is on the higher side than the industry.
Other revenues have a substantial portion of interest income.
Volumes grew significantly due to Bihar election and festival spending.
85-90% of revenue growth was due to volume.
The company is looking at Rs 28-29 crore as employee cost plus increase in wage inflation.
The company has spend Rs 15 crore till December 2015 quarter and for the full year it will be around Rs 20 crore.
Hindustan is dominant No 1 in Bihar and clear No 1 in Uttarakhand. There is a long way for UP to catch up with Bihar and Jharkhand. In UP the company is the second largest and the fastest growing Daily.
In Jharkhand, Hindustan is No 1 in Readership. It is no. 2 in Delhi
Tax rate for the quarter was lower due to long term gains on treasury. For FY 2016 it should be around 26-27%