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MEDIA
Ad growth strong due to festive season: Q3FY11 Result Preview: Edelweiss
Key highlights of the sector during the quarter
Momentum in media spends continues with recovery in the overall economy. This
quarter should get additional benefit of a delayed festive season compared with
last year. Hence, ad spends are higher in Q3FY11. TV medium, in particular, has
benefited from increased competition in the FMCG space (one of the largest ad
spenders). Other categories like home and electronic appliances, automobile, real
estate, textiles, jewellery and luxury products too are contributing to the increase
in ad spends. Star Plus has further consolidated its No. 1 position in the GEC
space, with Colors at a strong No. 2. The fight for No. 3 has become intense
between Zee TV and Sony. Healthy capital market activity should benefit business
news channels. Multiplexes have gained due to continuous flow of movies and
success of Golmaal 3. Increasing digitisation and DTH penetration continue to
boost subscription revenues for all broadcasters. Dish TV too will benefit from the
robust DTH subscriber addition. Newsprint prices have continued to inch up
marginally this quarter.
Result expectations for the sector and stocks under coverage
An improving business scenario and increased ad spends will lead to increased adrevenues
for Hindi GECs. Colors has maintained its strong No. 2 slot, which is
positive for IBN18, and it plans to close the gap with Star. Position of ZEEL’s
flagship channel, Zee TV, has been challenged among the top 3 GEC channels.
Sun TV continues to dominate the South Indian market. Increasing digitisation is
expected to continue to benefit subscription revenues of broadcasters. Ad revenue
growth for broadcasters and print players are expected to be strong in Q3FY11
due to festive season related ad spends and a lower base of Q3 last year.
Increasing competition could impact subscription revenues for print players to
some extent. Dish TV, the market leader in DTH, is likely to witness a healthy
subscriber addition.
Outlook over the next 12 months
We maintain a positive outlook on Dish TV, Jagran Prakashan, IBN18 (NewTV18)
and Sun TV. With the overall economy improving and improvement in media
spends, the advertising in media is expected to grow 14% Y-o-Y, in FY11. TV and
print media are expected to grow at 20% and 7% Y-o-Y, respectively, in FY11. On
the broadcasting front, we are more bullish on companies in the GEC space. Sun
TV is dominant in three out of the four South Indian markets. Broadcasting
companies are also increasing share of subscription revenues with increasing
digitisation and rapid increase in DTH subscriber numbers. Further, business news
channels are likely to benefit from the expected momentum in ad spends from
IPOs and budget in Q4FY11. Dish TV will continue to benefit from healthy addition
of DTH subscribers with some improvement in ARPUs. Performance of multiplexes
is expected to improve on the back of rapid expansion, a healthy movie pipeline,
improving occupancies and ATP hikes. Competitive intensity in print space is
expected to increase. Newsprint prices have trended up and would need to be
monitored closely.
Recommendations
Top picks: Dish TV, Jagran Prakashan, IBN18 (NewTV18), Sun TV.
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