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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Media
Glitz + Glamour + GDP = Moolah?
Secular growth but margin pressure to eat into earnings
Slowing GDP – how painful would it be? Inflation worries and a slowdown
in investment growth have cast a negative shadow on GDP growth forecasts
of the street. We acknowledge the tight correlation between the GDP growth
and performance of the media industry but do not think there is serious risk to
the 14% CY11 growth forecast by FICCI KPMG done a year ago.
Fresh growth estimates for the Indian media industry will be released over the
next month, setting the agenda for CY11. Ahead of this, we met with series of
stakeholders – listed players, industry consultants, ad sales managers and
content creators – to assess the outlook for the industry.
We believe that CY11 will be another good year of growth for the industry.
Even so, strength in top-line growth needs to be seen in conjunction with
margin pressures for screening money-making stock ideas.
Prefer end markets where competition has stagnated
Within our universe, we like subsectors that are proxies for the consumption
theme and where the margin profile is not threatened by escalating raw
material costs or/and under competitive pressure between peers.
Broadcasters: Competition in the Hindi GEC market remains intense, though
we are past the peak intensity seen in 2008 with the entry of four new players.
However, in case of Zee the high loss witnessed in the sports segment last
quarter has made us cautiously optimistic about the stock.
Distribution: The increase in the number of players has been a blessing in
disguise for the incumbent players Dish TV and Tata Sky (unlisted). The
increased advertising spend on customer awareness in the category has
jumped to ~Rs6bn in FY10, driving a record ~12m subscriber additions in last
12 months. Fixed price content deals with the broadcasters have yielded
positive results for financial health of the distributors. (See Fig 3 for Dish TV)
Print: The leading print players are trying to expand in new geographies and
capture market share. Our checks with industry sources indicate that
companies take up to three years to break even on the EBITDA level for their
new editions. This could pressurise the margins in the interim, but print names
are the best way to play the rural growth flavour. For details please see our
MacVisit notes on DB Corp. and Jagran Prakashan on pages 14 and 18.
Dish TV is our preferred pick in the sector
Digitisation: Pull vs. Push. We believe the digitisation story in India is driven
by consumer pull rather then regulatory or incumbent cable operators pushing
the product. As such, the rapid increase in the share of digital Cable &
Satellite Households, as seen in the latest IRS survey, will likely continue.
FCF break even a key turning point. After achieving EBITDA break-even
ahead of the guidance, positive FCF is the next trigger for the re-rating of the
stock. Based on our analysis of the fixed content deals that Dish entered in
December 2009, we believe that the company has a fair chance to hit this
milestone in FY12.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Media
Glitz + Glamour + GDP = Moolah?
Secular growth but margin pressure to eat into earnings
Slowing GDP – how painful would it be? Inflation worries and a slowdown
in investment growth have cast a negative shadow on GDP growth forecasts
of the street. We acknowledge the tight correlation between the GDP growth
and performance of the media industry but do not think there is serious risk to
the 14% CY11 growth forecast by FICCI KPMG done a year ago.
Fresh growth estimates for the Indian media industry will be released over the
next month, setting the agenda for CY11. Ahead of this, we met with series of
stakeholders – listed players, industry consultants, ad sales managers and
content creators – to assess the outlook for the industry.
We believe that CY11 will be another good year of growth for the industry.
Even so, strength in top-line growth needs to be seen in conjunction with
margin pressures for screening money-making stock ideas.
Prefer end markets where competition has stagnated
Within our universe, we like subsectors that are proxies for the consumption
theme and where the margin profile is not threatened by escalating raw
material costs or/and under competitive pressure between peers.
Broadcasters: Competition in the Hindi GEC market remains intense, though
we are past the peak intensity seen in 2008 with the entry of four new players.
However, in case of Zee the high loss witnessed in the sports segment last
quarter has made us cautiously optimistic about the stock.
Distribution: The increase in the number of players has been a blessing in
disguise for the incumbent players Dish TV and Tata Sky (unlisted). The
increased advertising spend on customer awareness in the category has
jumped to ~Rs6bn in FY10, driving a record ~12m subscriber additions in last
12 months. Fixed price content deals with the broadcasters have yielded
positive results for financial health of the distributors. (See Fig 3 for Dish TV)
Print: The leading print players are trying to expand in new geographies and
capture market share. Our checks with industry sources indicate that
companies take up to three years to break even on the EBITDA level for their
new editions. This could pressurise the margins in the interim, but print names
are the best way to play the rural growth flavour. For details please see our
MacVisit notes on DB Corp. and Jagran Prakashan on pages 14 and 18.
Dish TV is our preferred pick in the sector
Digitisation: Pull vs. Push. We believe the digitisation story in India is driven
by consumer pull rather then regulatory or incumbent cable operators pushing
the product. As such, the rapid increase in the share of digital Cable &
Satellite Households, as seen in the latest IRS survey, will likely continue.
FCF break even a key turning point. After achieving EBITDA break-even
ahead of the guidance, positive FCF is the next trigger for the re-rating of the
stock. Based on our analysis of the fixed content deals that Dish entered in
December 2009, we believe that the company has a fair chance to hit this
milestone in FY12.
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