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India Print – Everyone Loves the Story; Missing Near-Term Pain?
Regional print - Good story — India is one of the few markets globally where print is
growing, driven by regional newspapers. This provides investment merits as it provides
a) a play on the rising consumption in non metro cities, b) increasing education /
newspaper penetration in India; and c) benefits from the big mismatch between
regional print’s share of the ad pie, despite disproportionately higher readership.
Medium-term positive; Near-term cyclical pain — The readership / advertising share
gap has narrowed in recent years as regional print is growing well ahead of English
(English was 60% of ad pie in 2003, now 40%). The premium that English print enjoyed
in ad revenue/reader has reduced from ~12x to 5x in the last seven years. Localization
of content, scale, good management teams & healthy cash generation makes us
positive on a medium-term perspective; however, we highlight headwinds that pose
downside risks to estimates and the positive consensus view in the near term.
A. Newsprint – Waste-paper woes — Newsprint is the largest cost item for print
companies (~30-50% of revenues) and thus an important driver of margins. While
international newsprint prices have been stable, domestic newsprint has witnessed
~15-25% price escalation YTD - primarily following sharp increases in waste-paper
prices (which almost doubled last year). Further, the recent expansions and circulation
increases by the larger print companies have driven the rise in demand for indigenous
newsprint – and is likely to keep prices elevated.
B. Advertising – Will national support local? — Advertising is unlikely to sustain
~20-30% growth seen in the last few Qs. Companies are talking of 15-20% growth in
FY12 – buttressed only by local ads (limited impact of the broad market moderation).
Softness in the education sector (print’s largest advertiser, 15% of pie) impacts growth.
C. Rising competition — As companies expand into new markets, this leads to lower
cover prices, increased brand building spends, sizeable ad-rate discounts, etc – which
weighs on overall industry profitability in the near term. Any ‘potential’ ad market
expansion occurs only with a lag
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Print – Everyone Loves the Story; Missing Near-Term Pain?
Regional print - Good story — India is one of the few markets globally where print is
growing, driven by regional newspapers. This provides investment merits as it provides
a) a play on the rising consumption in non metro cities, b) increasing education /
newspaper penetration in India; and c) benefits from the big mismatch between
regional print’s share of the ad pie, despite disproportionately higher readership.
Medium-term positive; Near-term cyclical pain — The readership / advertising share
gap has narrowed in recent years as regional print is growing well ahead of English
(English was 60% of ad pie in 2003, now 40%). The premium that English print enjoyed
in ad revenue/reader has reduced from ~12x to 5x in the last seven years. Localization
of content, scale, good management teams & healthy cash generation makes us
positive on a medium-term perspective; however, we highlight headwinds that pose
downside risks to estimates and the positive consensus view in the near term.
A. Newsprint – Waste-paper woes — Newsprint is the largest cost item for print
companies (~30-50% of revenues) and thus an important driver of margins. While
international newsprint prices have been stable, domestic newsprint has witnessed
~15-25% price escalation YTD - primarily following sharp increases in waste-paper
prices (which almost doubled last year). Further, the recent expansions and circulation
increases by the larger print companies have driven the rise in demand for indigenous
newsprint – and is likely to keep prices elevated.
B. Advertising – Will national support local? — Advertising is unlikely to sustain
~20-30% growth seen in the last few Qs. Companies are talking of 15-20% growth in
FY12 – buttressed only by local ads (limited impact of the broad market moderation).
Softness in the education sector (print’s largest advertiser, 15% of pie) impacts growth.
C. Rising competition — As companies expand into new markets, this leads to lower
cover prices, increased brand building spends, sizeable ad-rate discounts, etc – which
weighs on overall industry profitability in the near term. Any ‘potential’ ad market
expansion occurs only with a lag
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