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UBS Investment Research
IBN18 Broadcast
Management meeting takeaways
„ Takeaways from meeting with Haresh Chawla (Group CEO, Network18)
1) The distribution partnership with Sun (Sun18) is likely to start contributing to
subscription revenue growth from 1QFY12. 2) IBN18 management plans to
increase the number of hours of original content in its Hindi general entertainment
channel (GEC), ‘Colors’. It currently has ~24 hours/week of original content. 3)
IBN18 plans to launch a few regional entertainment channels in FY12. 4) IBN18
plans to produce or co-produce 6-7 movies in FY12, which is likely to contribute
~10% to Viacom18’s revenue.
„ We believe IBN18 is a play on fast growing subscription revenue
We expect IBN18’s (restructured) subscription revenues to grow from ~10% of
revenue currently to 25% by FY15 led by: 1) the fast growing DTH subscription
base; 2) formation of a distribution company in partnership with Sun Network,
which will improve distribution capabilities (e.g. ‘Colors’ is now part of the base
subscription pack on Tata Sky DTH versus an upgrade pack earlier); and 3)
expansion into international markets.
„ Strong quarterly results likely to act as a catalyst
We expect quarterly data points on revenue growth and EBITDA margin
expansion, led by growth in subscription revenue, to act as a catalyst. We note
3QFY11 was an exceptionally good quarter due to strong festival-season demand
and the broadcast of big shows such as Big Boss and the blockbuster movie
Dabangg on ‘Colors’. We raise our EPS estimates for FY11/FY12/FY13 from
(Rs0.06)/Rs2.76/Rs5.50 to Rs0.84/Rs2.78/Rs5.60.
„ Valuation: maintain Buy, DCF-based price target of Rs130 (35% f. upside)
We derive our price target from DCF-based methodology (WACC of 13.11%) and
explicitly forecast long-term valuation drivers using UBS’s VCAM tool.
We raise our estimates for FY11 to incorporate strong 3Q results. IBN18’s
(restructured) 3QFY11 revenue grew 20.9% YoY to Rs3.15bn. EBITDA grew
123% YoY to Rs550m (UBS estimate: Rs273m); EBITDA margin expanded
800 bps YoY to 17.5%. IBN18 achieved net profit breakeven in 3QFY11 and
reported net profit of Rs310m ahead of UBS’s estimate at Rs30m. These
numbers include the business news channels acquired from TV18 as part of the
business restructuring
Q IBN18 Broadcast
IBN18 was incorporated in June 2005 as Global Broadcast News and started
commercial operations in December 2005. IBN18 operates news channels CNN
IBN and IBN7. It is a subsidiary of Network18 Group, a media conglomerate in
India. IBN18 has a 50:50 JV with Viacom named Viacom18, which operates
Colors, MTV, VH1 and Nickelodeon. IBN18 also operates regional (Marathi)
news channel, IBN Lokmat, under a 50:50 JV with Lokmat Group (IBN
Lokmat). IBN18 acquired the business news channels (CNBC TV18 and CNBC
Awaaz) from TV18 in a group restructuring in July 2010.
Q Statement of Risk
We believe the key risks for IBN18 are: 1) intense competition in most of its
broadcasting genres, especially the Hindi GEC; 2) heavy reliance on advertising
revenue; and 3) regulatory risk, as the news segment of the Indian broadcasting
industry is exposed to significant regulation on up-linking and ownership
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
IBN18 Broadcast
Management meeting takeaways
„ Takeaways from meeting with Haresh Chawla (Group CEO, Network18)
1) The distribution partnership with Sun (Sun18) is likely to start contributing to
subscription revenue growth from 1QFY12. 2) IBN18 management plans to
increase the number of hours of original content in its Hindi general entertainment
channel (GEC), ‘Colors’. It currently has ~24 hours/week of original content. 3)
IBN18 plans to launch a few regional entertainment channels in FY12. 4) IBN18
plans to produce or co-produce 6-7 movies in FY12, which is likely to contribute
~10% to Viacom18’s revenue.
„ We believe IBN18 is a play on fast growing subscription revenue
We expect IBN18’s (restructured) subscription revenues to grow from ~10% of
revenue currently to 25% by FY15 led by: 1) the fast growing DTH subscription
base; 2) formation of a distribution company in partnership with Sun Network,
which will improve distribution capabilities (e.g. ‘Colors’ is now part of the base
subscription pack on Tata Sky DTH versus an upgrade pack earlier); and 3)
expansion into international markets.
„ Strong quarterly results likely to act as a catalyst
We expect quarterly data points on revenue growth and EBITDA margin
expansion, led by growth in subscription revenue, to act as a catalyst. We note
3QFY11 was an exceptionally good quarter due to strong festival-season demand
and the broadcast of big shows such as Big Boss and the blockbuster movie
Dabangg on ‘Colors’. We raise our EPS estimates for FY11/FY12/FY13 from
(Rs0.06)/Rs2.76/Rs5.50 to Rs0.84/Rs2.78/Rs5.60.
„ Valuation: maintain Buy, DCF-based price target of Rs130 (35% f. upside)
We derive our price target from DCF-based methodology (WACC of 13.11%) and
explicitly forecast long-term valuation drivers using UBS’s VCAM tool.
We raise our estimates for FY11 to incorporate strong 3Q results. IBN18’s
(restructured) 3QFY11 revenue grew 20.9% YoY to Rs3.15bn. EBITDA grew
123% YoY to Rs550m (UBS estimate: Rs273m); EBITDA margin expanded
800 bps YoY to 17.5%. IBN18 achieved net profit breakeven in 3QFY11 and
reported net profit of Rs310m ahead of UBS’s estimate at Rs30m. These
numbers include the business news channels acquired from TV18 as part of the
business restructuring
Q IBN18 Broadcast
IBN18 was incorporated in June 2005 as Global Broadcast News and started
commercial operations in December 2005. IBN18 operates news channels CNN
IBN and IBN7. It is a subsidiary of Network18 Group, a media conglomerate in
India. IBN18 has a 50:50 JV with Viacom named Viacom18, which operates
Colors, MTV, VH1 and Nickelodeon. IBN18 also operates regional (Marathi)
news channel, IBN Lokmat, under a 50:50 JV with Lokmat Group (IBN
Lokmat). IBN18 acquired the business news channels (CNBC TV18 and CNBC
Awaaz) from TV18 in a group restructuring in July 2010.
Q Statement of Risk
We believe the key risks for IBN18 are: 1) intense competition in most of its
broadcasting genres, especially the Hindi GEC; 2) heavy reliance on advertising
revenue; and 3) regulatory risk, as the news segment of the Indian broadcasting
industry is exposed to significant regulation on up-linking and ownership
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