TELEVISION EIGHTEEN INDIA Improving outlook :Buy : Edelweiss

Visit http://indiaer.blogspot.com/ for complete details �� ��


TELEVISION EIGHTEEN INDIA
Improving outlook


􀂄 News revenue up 5% Y-o-Y, in line with estimate
Television Eighteen India’s (TV18) Q2FY11 news business revenues rose 5.0% Yo-
Y to INR 680 mn (in line with our estimate of INR 683 mn); revenues jumped
6.3% Q-o-Q. Business news channels maintained leadership with 57% market
share during the quarter. IBN18 reported a strong top line growth of 38.6% Y-o-Y
with revenue of INR 1,891 mn.
􀂄 News business posts healthy EBITDA margin of 30.9%
The company’s news business recorded EBITDA of INR 210 mn against our
estimate of INR 160 mn, an impressive improvement from INR 65 mn in Q1FY10.
EBITDA margin in Q2FY11 stood at 30.9% against 10.1% in Q2FY10. Margins
expanded on the back of the company’s strong cost cutting initiatives on the
operating cost front including restructuring of back-end operations of CNBC -
TV18 and CNBC AWAAZ. Operating costs, as a percentage of sales, declined from
89.9% to 69.1% Y-o-Y. For IBN18, the EBITDA stood at INR 20 mn against an
EBITDA level loss of INR 380 mn in Q2FY10.
􀂄 News business PAT at INR 60 mn, ahead of our estimate of INR 53 mn
In Q2FY11, TV18 reported an adjusted PAT of INR 60 mn against a loss of INR
331 mn in Q2FY10 on the back of an improved operating margin profile and sharp
dip of 98.1% in interest cost as the company used rights issue proceeds to retire
debt. Net profit margin stood at 8.9% against 7.8% in Q1FY11. For IBN18, the
PAT level losses reduced to INR 129 mn from INR 530 mn in Q2FY10.
􀂄 Outlook and valuations: Improving; maintain ‘HOLD’
In view of the restructuring at Network18 group we migrate our coverage from
TV18 to IBN18 (NewTV18) as TV18’s main business will be merged with IBN18
and the former will cease to exist. NewTV18 has one of the strongest bouquets of
channels across genres with leading channels such as Colors, CNBC TV18, CNBC
Awaaz, CNN IBN, MTV, Nick, and IBN7. It has consistently been able to maintain
its viewership share and will gain due to sharp uptick in the ad environment.
NewTV18 is focusing on building subscription revenues and provides the best
scale up due to a low base and strategic alliance with Sun TV. While we maintain
our ‘HOLD’ rating on TV18 we migrate our coverage from TV18 to IBN18
(NewTV18) with a ‘BUY’ recommendation and rate it ‘Sector Performer’ on
relative return basis.