Media: Q2FY11 Preview by Centrum

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Momentum to continue
With advertisers back in the business, we expect ad
revenues to show revenue growth for most of the
companies. Margin improvement is also expected due
to cost rationalization in the industry. Sun TV is
expected to post strong growth on the revenue and
margin front. We continue to be overweight on the
sector.
􀂁 Strong revenue growth expected: We expect 18.6%
YoY growth in sales for the coverage universe on back
of strong advertisement volumes across sectors and
rate hike taken earlier in the year. However, the festive
season falling in Q3 this year compared to Q2 last year
would mute the growth trajectory. Sequential revenue
to de-grow by -2.2%.
􀂁 Margin improvement: Due to the increases in
revenues and cost rationalization, we foresee a margin
expansion of 385 bps for companies under coverage.
Sun TV Network and HTML are expected to show
significant margin expansion, while ENIL, ZEEL
numbers are not comparable. On a sequential basis
margins are expected to remain flat.
􀂁 Profits to expand: With the recovery back on track and
revenues picking up, we expect the industry to show a
healthy 28.5% YoY growth in PAT for the quarter. Sun
TV Network and ZEEL are expected to positively
surprise.
􀂁 Valuations: We are overweight on the sector with Sun
TV Network, ZEEL, and Jagran Prakashan as our top
picks. We have a HOLD rating on HT Media and ENIL
and a SELL on Balaji.