FREE

Media Q4FY18 preview: TV, Multiplexes - good quarter; Radio, Print - lackluster

We believe TV Broadcasters will continue to outperform their Print and Radio peers in terms of ad growth. Their largest sectoral contributor, FMCG (~55% of overall TV ad revenue), continues to increase its Advertising & Promotion (A&P) spend (led by demand recovery and competition). Continued lacklustre ad spend in the government, real-estate and local sectors (large contributors to Print and Radio) along with a high-base in UP elections could have a bearing on the performance of couple of Print players. Cable companies will continue to see marginal improvement in net realization qoq, while superior performance in Broadband business will persist; Dish TV and Videocon D2H will report combined financials for the first time, which could be marred with adjustments. A good quarter in multiplexes, led by strong content, will help both footfalls and ad revenues. We estimate 7.6% revenue, 6.8% EBITDA and 1.0% adj. PAT growth in the TV, Print and Radio segments of our coverage universe.

TV Broadcasters: Ad growth momentum is expected to continue for both Zee Entertainment (Z; +22.5% yoy) and Sun TV Network (SUNTV; +15.8% yoy) during the quarter, as FMCG players and large regional advertisers have increased spending; however, the growth would be lower than Q3FY18 as the base is not as favourable. Both Zee and Sun TV will see a marked improvement in Q4FY18E subscription revenues, with Zee expected to post 10.6% qoq growth in domestic subscription, while SUNTV will continue to benefit from improved monetization across non-Tamil Nadu markets and post 17.7% yoy growth. Zee’s launch of ZEE5 will see a marked increase in P&L investments and hence, we expect the company’s margin to decline 350bp yoy to 27.2%.

Distributors (Cable/DTH): For both Hathway Cable (HATH) and Den Networks (DEN), cable subscription revenue growth is expected to decelerate sequentially although Phase III/IV monetization will continue to improve (2% qoq for HATH / 6% qoq for DEN). HATH’s broadband business continues to do well and revenue is expected to post 6% qoq growth led by 50,000 net additions. Margin is expected to remain stable for both players. Dish TV India (DITV) will report results for the combined DITV-VD2H entity during the quarter and there could be some adjustments. As of now, we expect 1% qoq ARPU improvement and flat qoq EBITDA on a pro forma basis.

Print Media: For HT Media (HTML), we expect English print to post 3% yoy growth on a weak base, while Hindi will decline 3% yoy, led by UP elections benefit sitting in the base. Jagran Prakashan (JAGP) too is expected to report 2.5% yoy decline in Print ad revenue because of UP elections-related advertising in the base and continued slowdown in local advertising. DB Corp (DBCL) is expected to post 8% yoy growth in Print advertising revenue, given its poor base and some recovery in local advertising in its core markets. Margin for print players, barring HT Media (HTML) (benefit of severe cost cutting in the last quarter) is expected to remain under pressure due to poor advertising revenue and increased circulation (higher tonnage of raw material used).

Radio: Entertainment Network India (ENIL) is expected to post flat revenue growth, as government spending began only in March (after a virtual blacklist for last 3 quarters), while focus on yields over inventory continued. DBCL’s and HTML’s radio business is also expected to remain flat yoy, led by weak government, real estate and local advertising revenues. However, JAGP’s radio segment (Radio City) is expected to post strong ~12% yoy growth, led by higher volumes.

Movie Exhibitors: We expect PVR (PVRL) to register a strong Q4 (strongest Q4 in last 5-6 years) on strong content (which would lead to ~4% yoy increase in footfalls and 7% yoy growth in average ticket prices). Ad revenue is expected to grow ~35% yoy  and margin is expected to be the best ever at 15.4%.

We have adjusted FY18E estimates for most companies under our coverage to reflect our expectation of Q4FY18E. As a result, we have changed our FY19E PAT estimates in the range of +4.4% (PVRL) to -9.2% (DBCL) and FY20E PAT estimates from +2.8% (PVRL) to -3% (Zee). We have an Outperformer on Zee, Sun TV, Dish TV, PVR, ENIL, DB Corp and HT Media; Neutral on Jagran Prakashan and Hathway Cable and Underperformer on Den Networks. Zee and Dish TV are our top picks in this space.