Zee: GRP data comforts GEC story:: Macquarie Research

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


India Media
Zee: GRP data comforts GEC story
Event
 We analyse the trends in weekly viewership (GRP) for Hindi general
entertainment channels (GECs) and regional GECs for the week-ended 5 March.
For detailed channel GRPs and viewership share across genres, please see Fig
1–4. We like Zee for the secular growth but the stock return in the near term might
be subdued because of a lack of momentum in subscription revenues and cost
pressure from the sports segment. Dish TV is our preferred pick in the space.

Impact
 Zee TV at #3 for 11 successive weeks. Following the struggle between Zee
TV and Sony for the No.3 slot in 2H CY10, we see a clear trend of Zee
consolidating its position ahead of Sony. According to data released by TAM,
Star Plus remained the #1 channel with 280 GRPs, followed by Colors at #2
with 231 GRPs and Zee TV at #3 with 217 GRPs. SAB has been the surprise
at #4 with 143 GRPs and Sony at #5 with 140 GRPs for the week.
 Family soaps = sticky viewership = stable prime-time rankings. From the
perspective of advertising revenues, prime-time GRPs are extremely crucial
for TV broadcasters. Zee TV, the flagship channel for ZEEL, derives ~60% of
its weekly GRPs from prime time. (See Fig 3 & 4)
 Little risk to ad growth forecast but subscription lacks momentum. We
remain comfortable with our FY12 ad growth forecast of 15% for ZEEL given
the performance of the core GEC business. On subscription revenues (42% of
top-line), we expect the strength in the domestic segment (22% FY12 growth)
to be tapered down by sluggishness on the international front – leading to
overall subscription revenue growth of 15%.
 Potential cost escalation in sports segment still a worry. Our earnings
and target price cut post the 3Q results were completely linked to the negative
surprise on the sports business loss. Our revised EBITDA margin assumption
of 25% for FY12 adequately captures the downside from acquiring costly
cricket properties. The company might positively surprise on profitability on a
quarterly basis but we would wait for a sustained trend before we turn more
bullish.
Outlook
 Dish TV is our top pick in the sector. We recommend investors to play the
Indian media story by investing in Dish TV. In our detailed sector report, “India
Media - Glitz + Glamour + GDP = Moolah?”, we had argued for investing in
media sub sectors that are proxies for the consumption theme and where the
margin profile is not threatened by escalating raw material costs and/or
competitive pressure between peers. We believe DTH operators fit the bill.