HT Media: Slowing momentum

Low tax rate boosts the bottomline of the media house by 19 per cent y-o-y.

The net profits of HT Media rose by 19 per cent to Rs 32 crore in the September 2007 quarter due to a lower effective tax rate.

The effective tax rate was just 23 per cent in Q2 FY08 compared with 36 per cent in Q2 FY07. The profit before tax actually declined marginally to Rs 41.6 crore.

The company's top line growth was subdued in the September quarter at a mere 12.4 per cent y-o-y to Rs 281 crore. The culprit was advertising revenues, which were up by just 14 per cent, marking the lowest growth in the last eight quarters.

While the base effect may be playing out-advertising revenues have been growing at 25-30 per cent in the past""what is worrying is that the slowdown in the auto and realty sectors, which account for 30-35 per cent of ads, could persist. Also, it's the Hindi segment that has driven growth with ad revenues up 25 per cent.

With the total expenditure rising at 15 per cent plus, the operating profit margin fell 180 basis points y-o-y to 17.3 per cent.

Even after adjusting for the Rs 9.5 crore loss posted by Mint - the financial daily launched at the start of 2007 - the operating margin has fallen 100 basis points. The staff costs at 15 per cent of sales were higher by about 110 basis points, offsetting the benefits of lower expenses on newsprint.

The company is transferring its Hindi newspaper, Hindustan, to a subsidiary indicating that it wants to scale up the business.

It also wants to focus on the internet space and is looking at acquiring a social networking site so as to be able to post classified advertisements across verticals such as jobs, matrimony and real estate.

Since the company has a fair amount of cash on its books at around Rs 225 crore, it is hard to see the rationale for creating a subsidiary and it would appear that the idea is to raise resources.

At the current price of Rs 220, the stock trades at 24 times estimated FY09 earnings and is expensive, given that the earnings momentum is slowing down.

Refinery stocks: Standing tall

Standalone public sector refiners reported an improved performance in the September 2007 quarter.

This is not surprising as the gross refining margins (GRMs) have been high on a y-o-y basis. Chennai Petroleum's operating profit margin improved 320 basis points y-o-y to 6.8 per cent in Q2 FY08, while that of MRPL expanded 415 basis points to 5.9 per cent.

Chennai Petroleum's crude throughput was 2.67 million tonnes in the September 2007 quarter compared with 2.51 million tonnes a year earlier. Bongaigaon Refinery's crude throughput was 0.5 million tonnes in the last quarter, a yearly decline of 4.2 per cent.

The global shortage of refining capacity has led to high GRMs. Chennai Petroleum's GRMs, for instance, were $6.84 per barrel in Q2 FY08 compared with $4.15 barrel a year earlier.

The regional benchmark Singapore refining margin was $6.4 a barrel in the September 2007 quarter.

The strong GRMs have helped these stocks to recent highs. For instance, Chennai Petroleum touched a 52-week high of Rs 490 on Monday, while MRPL hit a 52-week high of Rs 148.6 in Friday's trade.

MRPL has appreciated 200 per cent in the past three months, while Chennai Petroleum is up 73 per cent in a month.

With contributions from Shobhana Subramanian and Amriteshwar Mathur