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MEDIA
We expect media companies in our coverage universe to post strong 4QFY11
results. Median revenue growth of our coverage universe is estimated at
23% y/y, and median PAT growth is 27% y/y. Growth shall largely be led by
advertising revenues, which will continue to be strong on the back of
improving consumption and high competition. Y/Y, we also expect
improvement in margins led by higher utilization of inventory and
improving yields. However, growth will be muted/negative on a q/q basis,
both in terms of revenues and margins - resulting from seasonality (3Q
being the strongest quarter of the year) as well as rising inflation in key
commodities (newsprint). Our broad stance on the sector remains positive,
and Sun TV Network and HT Media are our top picks. Surprises/ factors to
watch for would include: 1/ impact of unexpectedly strong cricketing season
and impact on various sub-industries, 2/ gaining facts on the extent of
(further) flexibility newspaper publishers possess in management of
newsprint expenses, 3/ overall strength in advertising environment.
n DB Corp: Advertising revenues shall continue to be strong for DB Corp, enabling
growth of 26% y/y. We expect margins to rise 4.8 ppt y/y, due to improved
yields/ better ad-edit ratios. DB Corp and competitor Dainik Jagran have shown
considerable flexibility in managing newsprint consumption both by quantity and
by quality (substitution of foreign newsprint with domestic newsprint and usage
of cheaper newsprint), which we expect shall continue in this quarter, thus softening
impact on gross margins. On a q/q basis, however, we expect margins to
decline on account of new editions of Dainik Bhaskar, and lower utilization of
pages in comparison with 3QFY11. EPS growth, at 59%, shall continue to be
robust.
n HT Media: We expect continued strength in advertising revenues, led by stronger
readership of the company's newspapers. Hindustan shall continue being on
a high growth path, with strong growth in Bihar and Jharkhand as well as
strengthening presence in Uttar Pradesh. HT Media's circulation revenues shall
continue to register y/y declines on account of higher circulation in Mumbai as
well as price war underway in Jharkhand. We expect margins to decline y/y as a
result of higher newsprint expenses. Including HT Burda revenues, we estimate
revenues of the company to rise 23.9% y/y, and EPS to register growth of 8.7%
y/y.
n Jagran Prakashan: Advertising revenues shall grow at a healthy pace. However,
circulation revenues shall be flat for the quarter due to ongoing price competition
in Jhakhand/ parts of Uttar Pradesh. Given Jagran's relatively higher dependence
on circulation revenues, this would imply softer revenue growth for the company
(12%, y/y) in the quarter. We believe the company shall be able to maintain
reasonably strong margins, aided by better ad-edit ratios and improving advertising
yields. We estimate 25% y/y growth in EPS for the company. For consistency
with our annual estimates, we do not include Mid-Day Multimedia's financials in
our estimates (likely ~Rs 250mn in revenues, ~18-20% EBITDA margin).
n ENIL: ENIL is likely to report strong 3QFY11 results. We think advertising momentum
in radio advertising shall continue to remain strong and ad-rate hikes affected
by the company in the last two quarters shall begin to be passed on, resulting
in 18% y/y revenue growth. The company shall benefit from strong operating
leverage as well as lower royalty payments, which shall result in a strong
margin expansion for ENIL (+10.8 ppt, y/y). We estimate EPS growth of 193% y/
y on the back of these factors.
n Zee Entertainment Enterprises Limited: We believe advertising revenues for
Zee Entertainment shall be affected adversely by the strength in cricketing season
this quarter. While DTH adds have been strong, benefits for the same are
likely to be largely lagged. ZEEL revenues shall grow 14.1% y/y. In the absence
of one-off profits booked last quarter in the sports division, we expect profitability
to decline on the back of higher content expenses (-5.4 ppt decline in EBITDA
margins), and PAT to grow 13.6%y/y.
n Sun TV Network: We expect Sun TV's advertising revenues to be less affected
by the cricket season than Hindi GEC peers, since local advertising has a strong
bearing on Sun TV's total pie. Moreover, we expect Sun TV to report robust DTH
revenues on the back of new contracts. Overall, we expect Sun TV Network's
revenues to grow 26% y/y. Declines on q/q basis is to be expected on account of
Endhiran revenues - a large part of which was booked in 2Q/3Q FY11. We estimate
Sun TV Network's EPS to grow 29% y/y on the back of revenue growth.
n UTV: Overall, we expect UTV's results to trend towards 3QFY11 results. However,
segment-wise, we expect a fair degree of change. While revenues from
movies are unlikely to be as strong as 3QFY11, profitability is expected to be
higher (No One Killed Jessica, Saat Khoon Maaf, and Dhobi Ghaat are smaller
budget movies, and the company shall have covered a fair degree of costs in
C&S and ancillary rights). The broadcasting business of the company is likely to
be weaker than 3QFY11, as a result of seasonality as well as adverse impact
from the World Cup. Gaming revenues are expected to be weaker in the quarter
as last quarter carried the benefits from sale of rights of El Shaddai. We expect
the company's revenues to rise 2% q/q, and PAT to decline 2.2% q/q.
n IBN18: While advertising revenues shall be adversely impacted by the world cup,
IBN 18 has also faced increasing competitive intensity in the key Hindi GEC
space, which shall lead to escalation in programming costs, affecting margins
(expect 5.8 ppt decline in EBITDA margins). As guided by the management, we
expect that subscription revenues shall rise only modestly in the quarter, with
most gains likely to come in in FY12. We expect IBN18 to report PAT loss of Rs
-53mn for the quarter.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
MEDIA
We expect media companies in our coverage universe to post strong 4QFY11
results. Median revenue growth of our coverage universe is estimated at
23% y/y, and median PAT growth is 27% y/y. Growth shall largely be led by
advertising revenues, which will continue to be strong on the back of
improving consumption and high competition. Y/Y, we also expect
improvement in margins led by higher utilization of inventory and
improving yields. However, growth will be muted/negative on a q/q basis,
both in terms of revenues and margins - resulting from seasonality (3Q
being the strongest quarter of the year) as well as rising inflation in key
commodities (newsprint). Our broad stance on the sector remains positive,
and Sun TV Network and HT Media are our top picks. Surprises/ factors to
watch for would include: 1/ impact of unexpectedly strong cricketing season
and impact on various sub-industries, 2/ gaining facts on the extent of
(further) flexibility newspaper publishers possess in management of
newsprint expenses, 3/ overall strength in advertising environment.
n DB Corp: Advertising revenues shall continue to be strong for DB Corp, enabling
growth of 26% y/y. We expect margins to rise 4.8 ppt y/y, due to improved
yields/ better ad-edit ratios. DB Corp and competitor Dainik Jagran have shown
considerable flexibility in managing newsprint consumption both by quantity and
by quality (substitution of foreign newsprint with domestic newsprint and usage
of cheaper newsprint), which we expect shall continue in this quarter, thus softening
impact on gross margins. On a q/q basis, however, we expect margins to
decline on account of new editions of Dainik Bhaskar, and lower utilization of
pages in comparison with 3QFY11. EPS growth, at 59%, shall continue to be
robust.
n HT Media: We expect continued strength in advertising revenues, led by stronger
readership of the company's newspapers. Hindustan shall continue being on
a high growth path, with strong growth in Bihar and Jharkhand as well as
strengthening presence in Uttar Pradesh. HT Media's circulation revenues shall
continue to register y/y declines on account of higher circulation in Mumbai as
well as price war underway in Jharkhand. We expect margins to decline y/y as a
result of higher newsprint expenses. Including HT Burda revenues, we estimate
revenues of the company to rise 23.9% y/y, and EPS to register growth of 8.7%
y/y.
n Jagran Prakashan: Advertising revenues shall grow at a healthy pace. However,
circulation revenues shall be flat for the quarter due to ongoing price competition
in Jhakhand/ parts of Uttar Pradesh. Given Jagran's relatively higher dependence
on circulation revenues, this would imply softer revenue growth for the company
(12%, y/y) in the quarter. We believe the company shall be able to maintain
reasonably strong margins, aided by better ad-edit ratios and improving advertising
yields. We estimate 25% y/y growth in EPS for the company. For consistency
with our annual estimates, we do not include Mid-Day Multimedia's financials in
our estimates (likely ~Rs 250mn in revenues, ~18-20% EBITDA margin).
n ENIL: ENIL is likely to report strong 3QFY11 results. We think advertising momentum
in radio advertising shall continue to remain strong and ad-rate hikes affected
by the company in the last two quarters shall begin to be passed on, resulting
in 18% y/y revenue growth. The company shall benefit from strong operating
leverage as well as lower royalty payments, which shall result in a strong
margin expansion for ENIL (+10.8 ppt, y/y). We estimate EPS growth of 193% y/
y on the back of these factors.
n Zee Entertainment Enterprises Limited: We believe advertising revenues for
Zee Entertainment shall be affected adversely by the strength in cricketing season
this quarter. While DTH adds have been strong, benefits for the same are
likely to be largely lagged. ZEEL revenues shall grow 14.1% y/y. In the absence
of one-off profits booked last quarter in the sports division, we expect profitability
to decline on the back of higher content expenses (-5.4 ppt decline in EBITDA
margins), and PAT to grow 13.6%y/y.
n Sun TV Network: We expect Sun TV's advertising revenues to be less affected
by the cricket season than Hindi GEC peers, since local advertising has a strong
bearing on Sun TV's total pie. Moreover, we expect Sun TV to report robust DTH
revenues on the back of new contracts. Overall, we expect Sun TV Network's
revenues to grow 26% y/y. Declines on q/q basis is to be expected on account of
Endhiran revenues - a large part of which was booked in 2Q/3Q FY11. We estimate
Sun TV Network's EPS to grow 29% y/y on the back of revenue growth.
n UTV: Overall, we expect UTV's results to trend towards 3QFY11 results. However,
segment-wise, we expect a fair degree of change. While revenues from
movies are unlikely to be as strong as 3QFY11, profitability is expected to be
higher (No One Killed Jessica, Saat Khoon Maaf, and Dhobi Ghaat are smaller
budget movies, and the company shall have covered a fair degree of costs in
C&S and ancillary rights). The broadcasting business of the company is likely to
be weaker than 3QFY11, as a result of seasonality as well as adverse impact
from the World Cup. Gaming revenues are expected to be weaker in the quarter
as last quarter carried the benefits from sale of rights of El Shaddai. We expect
the company's revenues to rise 2% q/q, and PAT to decline 2.2% q/q.
n IBN18: While advertising revenues shall be adversely impacted by the world cup,
IBN 18 has also faced increasing competitive intensity in the key Hindi GEC
space, which shall lead to escalation in programming costs, affecting margins
(expect 5.8 ppt decline in EBITDA margins). As guided by the management, we
expect that subscription revenues shall rise only modestly in the quarter, with
most gains likely to come in in FY12. We expect IBN18 to report PAT loss of Rs
-53mn for the quarter.
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