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Media
Potential result outperformers: Sun TV
Potential result underperformers: ZEE, DB Corp
Likely muted ad growth
Channel checks with media planners indicate lower allocation of ad spends
during 1Q than anticipated, implying likely muted ad growth for both print and
broadcast companies for 1Q. While 1Q is seasonally weak, slow down in macro
economy and strong spend in ad growth during 4Q across GEC and sports
channels (world cup and IPL) has impacted ad spend allocations for the quarter.
While concerns over macro economy emerge, we believe over all ad budgets for
the year likely to remain strong. We expect recovery in 2nd half driven by onset of
festive season. For 1Q we have assumed ~10% yoy ad growth for ZEE and 15%
yoy ad growth for print companies such as DB Corp and Jagran. This compares
with our current assumption of ~14% growth for the full year for ZEE (ex regional
& sports) and 17% yoy growth for DB Corp.
Margins likely to disappoint
We expect margins to disappoint given muted ad growth and investments in
content/ new market expansion. ZEE has expanded its programming hours during
the quarter which will likely impact margins and print players such as DB Corp
have entered new markets i.e. Aurangabad/ Nashik. We forecast 400bps yoy
margin decline for ZEE and 1000bps yoy decline for DB Corp during the quarter.
Besides, for print increased newsprint costs likely to be a drag on margins.
Muted profit growth
Overall we believe profit growth likely to be muted across key companies.
Forecast 0-7% yoy growth for Zee, Jagran and Sun TV. DB Corp profits likely to
decline by 17% yoy.
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