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India media
Dish surges, time to look at Zee
Event
Investor interest driven by the broader consumption theme has resulted in a
27% surge in Dish stock since 2Q results vs -1% for Sensex during the same
period. Subscriber addition momentum up until now has been in line with our
expectation and we would wait to see if it would sustain in the lean month of
December before revising our estimates for Dish.
In this note, we collate and present different data points and media snippets
that have appeared over the last two weeks on the Indian media sector and
investment conclusions thereof. We remain positive on the Indian DTH sector
but believe Zee is more attractive at current market prices.
Distribution snippets
Dish has mopped up record subs additions in November: Dish added
0.5m subscribers in November, registering an impressive 29% net adds
market share. Earlier in the month, the company had disclosed that it has
crossed the 9m subs mark. We believe Dish is on track to meet the guidance
of 3m sub adds in FY11 and see upside risks to our estimates. In the first
eight months, the company has added 2.2m+ subscribers.
Digital penetration 3x higher in rural India. A recent IRS (Indian
Readership Survey) study out last week noted that digital TV penetration is
34% in rural India vs. 12% in urban centres. Swift adoption of better
technology by rural consumers is the key driver of expansion in the DTH
category – subscription revenues for broadcasters can be expected to move
up to reflect this trend.
Broadcasting snippets
KBC losing sheen, Season 4 to conclude in December: The game show
on Sony hosted by Bollywood celebrity Amitabh Bachan for the last seven
weeks is ending in December. The adjoining fiction shows on the channel
have failed to make it to the Top 10 list. As a result, we do not see the
competitive threat from Sony hurting the financial performance of Zee (see
Figure 1 for detailed viewership trends).
Sun evaluating entry to the regional space, rules out Hindi foray: In a
media interview with Indiantelevision.com, the Sun TV network CEO
mentioned that they would like to enter the regional TV space in Marathi and
Bengali but are unlikely to pursue a move in Hindi GEC space, given the
higher capex requirements. We note that Bengali and Marathi GECs already
have 5–7 channels, including Star.
Outlook
Retain OP on Zee: We believe Zee would be a beneficiary of the Indian
consumption story, given its large bouquet of TV channels. The stock has
performed broadly in line with the market YTD (up 17% vs the Sensex, up
14%) as concerns on competitive intensity have offset the secular growth
argument. We believe the apprehension is overblown and see upside risks to
our 15% ad growth assumption in FY12. Reiterate OP.
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