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MEDIA
2QFY12 earnings season shall see moderate top-line performance from
media companies under our coverage universe. Entertainment broadcasters'
topline shall be adversely impacted by continued belt-tightening measures
at FMCG companies; as also the shake-up in the top order in Hindi GECs.
Radio broadcasters are likely to see subdued growth as well, in line with
the last quarter(1QFY12). In terms of subscription revenues, we expect
broadcasters to continue benefiting from DTH proliferation/ digitization. We
expect 7.6% y/y revenue growth in our coverage universe. Expenses shall
rise strongly, however, and depress margins - we expect 4.5 ppt margin
compression (y/y) in our coverage universe. Newspaper publishers shall be
burdened with newsprint expenses that have risen ~30% y/y, while
broadcasters shall face higher content/ publicity expenses in a bid to remain
competitive. Net-net, we expect our coverage universe PAT to decline 11% y/
y in the aggregate. Weak valuations at current prices indicate that the
market has already factored in weak earnings. We expect limited impact of
the earnings season on the sector. HT Media remains our top pick in the
sector, and Zee Entertainment remains our top sell.
Advertising revenues of companies in our coverage universe are likely to be weak,
in line with 1QFY12. Our discussions with industry participants indicate pressure in
certain categories such as real estate, mobile service providers, and financial services.
Expect revenue growth shall continue to be higher for newspaper publishers
than broadcasters, on account of local advertising being less impacted by weakening
macroeconomic sentiment. We expect low-double digit growth y/y in newspapers
and nil to negative growth rates in case of broadcasters.
DTH proliferation shall continue to impact television broadcasters favorably, and we
expect 30%+ growth from DTH revenues for the two broadcasters in our coverage
universe.
Newsprint expenses shall continue to impact newspaper publishers. We expect escalation
of 25%-30% in newsprint expenses across our coverage universe. Broadcasters
are unlikely to see any benefits of the prevailing downturn as yet, and content
and other expenses shall continue to remain at elevated levels. As a result of the
above, we would expect margin contraction of ~4.5 ppt y/y in our coverage universe,
leading to a 12.8% decline in PAT through our coverage universe.
n DB Corp: Expect revenues to rise 10% y/y, as local advertising continues to hold
up. As has been the case in the past few quarters, DB Corp is likely to continue
booking marketing/ survey expenses on account of new editions (Nashik edition
of Divya Marathi launched in July, and Jalgaon edition launched in September).
Newsprint expenses for the company shall rise 36% y/y, leading to a 9.5 ppt
decline in margins. Expect PAT to drop 23% y/y.
n ENIL: We expect revenues Rs 666mn, implying 6.6% y/y growth in ENIL revenues.
Expect growth to be soft on account of softness in FMCG advertising.
However, expect growth in the radio industry to remain ahead of television
broadcasters. Radio Mirchi now trails in most metros, and expect the company to
have made marketing efforts in the quarter to strengthen the brand, leading to
lower (q/q) margins. Expect PAT to come in at Rs 94mn.
n HT Media: Expect fairly strong growth in advertising revenues across most newspapers,
given strong trends and improving yields. Expect flat revenues from
Delhi/ NCR (HT - Delhi edition) on account of de-growth in the Delhi real estate
category. Revenues likely to grow 9.8% y/y. Expect margins to decline 70 bps y/
y. Expect 12.5% growth in PAT.
n Jagran Prakashan: Expect 11% growth in advertising revenues, leading to
10.1% growth y/y in the topline. Expect strong impact on margins given ~30%
rise in newsprint expenses (20% growth on account of newsprint prices). Note
that margin compression is higher in Jagran Prakashan/ DB Corp on account of
lower base (y/y) as compared with HT Media, as domestic newsprint prices rose
with a lag. We estimate PAT Rs 460mn, down 27% y/y.
n Zee Entertainment Enterprises Limited: Advertising expenditures from the
key FMCG category have remained weak in the second quarter. Moreover, Zee
TV has lost the #3 spot and slipped to #4 following Sony's rise to #2. We believe
Zee Entertainment is likely to see flat advertising revenues and a minor growth in
subscription revenues, leading to 2.2% growth in revenues. Margins are likely to
further, as we think the content/ distribution expenses would likely have continued
to be high in the quarter. Expect PAT to come in at Rs 1115mn, decline of
11% y/y.
n Sun TV Network: Expect revenues growth to be weak on account of a decline
in pay TV revenues, due to the launch of Arasu cable. Margins (EBIT) are expected
to decline 6.4 ppt on account of lower subscription revenues. PAT likely
to come in at Rs 1574mn, declining 6% y/y.
n TV18 Broadcast: Colors has lost # 2 position to MSM's Sony, and we expect the
same to have an impact on the advertising revenues of Colors. Management
comments do not suggest that subscription revenues shall step up in the quarter.
Expect margins to decline 2.6 ppt y/y. Expect PAT loss of Rs 326 mn in the quarter.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
MEDIA
2QFY12 earnings season shall see moderate top-line performance from
media companies under our coverage universe. Entertainment broadcasters'
topline shall be adversely impacted by continued belt-tightening measures
at FMCG companies; as also the shake-up in the top order in Hindi GECs.
Radio broadcasters are likely to see subdued growth as well, in line with
the last quarter(1QFY12). In terms of subscription revenues, we expect
broadcasters to continue benefiting from DTH proliferation/ digitization. We
expect 7.6% y/y revenue growth in our coverage universe. Expenses shall
rise strongly, however, and depress margins - we expect 4.5 ppt margin
compression (y/y) in our coverage universe. Newspaper publishers shall be
burdened with newsprint expenses that have risen ~30% y/y, while
broadcasters shall face higher content/ publicity expenses in a bid to remain
competitive. Net-net, we expect our coverage universe PAT to decline 11% y/
y in the aggregate. Weak valuations at current prices indicate that the
market has already factored in weak earnings. We expect limited impact of
the earnings season on the sector. HT Media remains our top pick in the
sector, and Zee Entertainment remains our top sell.
Advertising revenues of companies in our coverage universe are likely to be weak,
in line with 1QFY12. Our discussions with industry participants indicate pressure in
certain categories such as real estate, mobile service providers, and financial services.
Expect revenue growth shall continue to be higher for newspaper publishers
than broadcasters, on account of local advertising being less impacted by weakening
macroeconomic sentiment. We expect low-double digit growth y/y in newspapers
and nil to negative growth rates in case of broadcasters.
DTH proliferation shall continue to impact television broadcasters favorably, and we
expect 30%+ growth from DTH revenues for the two broadcasters in our coverage
universe.
Newsprint expenses shall continue to impact newspaper publishers. We expect escalation
of 25%-30% in newsprint expenses across our coverage universe. Broadcasters
are unlikely to see any benefits of the prevailing downturn as yet, and content
and other expenses shall continue to remain at elevated levels. As a result of the
above, we would expect margin contraction of ~4.5 ppt y/y in our coverage universe,
leading to a 12.8% decline in PAT through our coverage universe.
n DB Corp: Expect revenues to rise 10% y/y, as local advertising continues to hold
up. As has been the case in the past few quarters, DB Corp is likely to continue
booking marketing/ survey expenses on account of new editions (Nashik edition
of Divya Marathi launched in July, and Jalgaon edition launched in September).
Newsprint expenses for the company shall rise 36% y/y, leading to a 9.5 ppt
decline in margins. Expect PAT to drop 23% y/y.
n ENIL: We expect revenues Rs 666mn, implying 6.6% y/y growth in ENIL revenues.
Expect growth to be soft on account of softness in FMCG advertising.
However, expect growth in the radio industry to remain ahead of television
broadcasters. Radio Mirchi now trails in most metros, and expect the company to
have made marketing efforts in the quarter to strengthen the brand, leading to
lower (q/q) margins. Expect PAT to come in at Rs 94mn.
n HT Media: Expect fairly strong growth in advertising revenues across most newspapers,
given strong trends and improving yields. Expect flat revenues from
Delhi/ NCR (HT - Delhi edition) on account of de-growth in the Delhi real estate
category. Revenues likely to grow 9.8% y/y. Expect margins to decline 70 bps y/
y. Expect 12.5% growth in PAT.
n Jagran Prakashan: Expect 11% growth in advertising revenues, leading to
10.1% growth y/y in the topline. Expect strong impact on margins given ~30%
rise in newsprint expenses (20% growth on account of newsprint prices). Note
that margin compression is higher in Jagran Prakashan/ DB Corp on account of
lower base (y/y) as compared with HT Media, as domestic newsprint prices rose
with a lag. We estimate PAT Rs 460mn, down 27% y/y.
n Zee Entertainment Enterprises Limited: Advertising expenditures from the
key FMCG category have remained weak in the second quarter. Moreover, Zee
TV has lost the #3 spot and slipped to #4 following Sony's rise to #2. We believe
Zee Entertainment is likely to see flat advertising revenues and a minor growth in
subscription revenues, leading to 2.2% growth in revenues. Margins are likely to
further, as we think the content/ distribution expenses would likely have continued
to be high in the quarter. Expect PAT to come in at Rs 1115mn, decline of
11% y/y.
n Sun TV Network: Expect revenues growth to be weak on account of a decline
in pay TV revenues, due to the launch of Arasu cable. Margins (EBIT) are expected
to decline 6.4 ppt on account of lower subscription revenues. PAT likely
to come in at Rs 1574mn, declining 6% y/y.
n TV18 Broadcast: Colors has lost # 2 position to MSM's Sony, and we expect the
same to have an impact on the advertising revenues of Colors. Management
comments do not suggest that subscription revenues shall step up in the quarter.
Expect margins to decline 2.6 ppt y/y. Expect PAT loss of Rs 326 mn in the quarter.
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