Given the improvement in equity earnings and growth outlook, India is now at the top end of the valuation range, with the Sensex presently trading at 18 times the FY17 earnings. Positive data from the Indian Met Department, stating that the monsoon is above normal in most parts of the country has helped the stock indices to stay in a positive mood. But continuation of earnings upgrade for Q1FY2017 could be critical for the current valuations to sustain. On the other hand, taking cues from global markets, Indian bond yields softened by nearly 20 basis points in a sudden move, throwing the 10-year-government security to trade at 7.38%. This has turned out to be good news for debt mutual fund investors to clock portfolio gains. Softening in bond yields improves the NAV (net asset value) of debt funds. Though in the short term it looks as if the RBI may not reduce interest rates, looking at the inflation outlook, but the global environment of ultra low bond yields plus excessive liquidity is an excellent support to our bond markets. The key benchmark indices closed the week with small losses. The Sensex and Nifty ended at 27,126 and 8,323 respectively. The stock markets are expected to consolidate at the present level and trade in a narrow range for most part of next week.
Investors can look at the media space and bet on Hindustan Media Ventures Ltd (HMVL) stock as a solid investment. It is one of the leading print media companies in India and the second largest read newspaper in the country. The company has been a market leader in Jharkand, Bihar and Uttarakhand and ranks among the top rung in Uttar Pradesh and Delhi. HMVL is a subsidiary of the New Delhi-based HT Media Group and its flagship brand Hindustan newspaper covers the news across the entire spectrum of international, national and local news relating to politics, sports, entertainment, business and other general interests. While the first edition of Hindustan was published in April 1936 from Delhi, the reach now extends across six states, with four editions and 113 sub editions. From the perspective of the advertisement industry, Uttar Pradesh is the largest market, with a size of over Rs 1,200 crore, and HMVL has started to increase the advertisement rates it charges to corporates. While advertising revenue growth may be led by FMCG and e-commerce advertisers, the higher yields and lower newsprint costs should improve operating profit margins. It has been consistently moving up the readership ladder over the last couple of years, replacing Dainik Bhaskar newspaper to claim the No. 1 spot. The Q4FY2026 results have been quite encouraging both in terms of volume and yield, which augurs well for the company.
The standalone total income from quarterly operations was Rs 224 crore, with a net profit of Rs 47 crores. Most analysts expect HMVL’s revenue to grow at a compounded rate of over 10% for FY 2017 and EBIDA to grow over 18% during the same period. From a valuation perspective, the stock currently quoting at Rs 270 is not expensive from a fundamental point of view. It merits an addition in the individual portfolio for healthy profitable returns over long term .The Rs 10 face value stock has a healthy book value of Rs 125 and with a market cap of Rs 2,010 crore and EPS of Rs 25, the PE works out to be only 11. With the industry PE around 19, the HMVL stock has huge room for further appreciation on the Indian bourses. With a leadership position in the Hindi heartland, consistent growth, clean balance sheet and healthy return ratios, the HMVL stock can achieve a target price of Rs 350 with an upside of 25% for a holding period of 9-12-month time horizon.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.