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TV18 BROADCAST LTD
PRICE: RS.44 RECOMMENDATION: BUY
TARGET PRICE: RS.65 FY13E P/E: 46.4X
q TV18 Broadcast results were ahead of our estimates on account of stronger
performance from news channels of the company, which offset (continued)
unexpected losses in the movie business of the company. The
company reported revenues Rs 3020 mn, and PAT (loss)Rs 81 mn for the
quarter. The balance sheet of the company is stable with net debt of Rs
6.8Bn in the quarter (versus Rs 6.7Bn in 1QFY12).
q Weakening advertising environment, intense competition in the Hindi
GEC space, force cuts in our estimates for FY12/ FY13. We believe the
company shall bring in (adjusted) EPS Rs 0.2 in FY12 (prior est: Rs 1.0)/ Rs
0.9 in FY13. As such medium-term profitability outlook has weakened
substantially. The company's decision to defer the launch of a Hindi
movie channel shall also impact the traction that the company can gain
in subscription revenues over the medium to long term. We cut our longterm
assumptions on subscription revenues of the company, and estimate
the fair value of the stock at Rs 65 (Rs 78 earlier).
q Even so, we believe that investor concerns on the debt of the company
have brought the stock to rather cheap valuations, at 1.5x EV/ Sales
FY13E. We believe TV 18 is exposed to various positives, including
changes in regulatory environment (mandatory digitization) and longterm
scale up in subscription revenues (as long as Colors holds up to a
significant position in Hindi GEC sweepstakes). While the holding
company's debt, at Rs 14.3 Bn, is a matter of concern, we think there is
merit in the management's belief that the company's assets are top-ofthe
class, and current losses are not a reflection of their valuation.
q While recognizing that there may be significant near-term risks to an investment
in TV18 Broadcast on account of earnings , we also believe that
an asset view of the company suggests particularly weak valuations and
significant pessimism, at EV/ Sales of 1.5x FY13E. We are attracted by the
potential for the stock to provide large returns, if concerns on debt of
the parent subside (likely, given pressure on the management to act towards
monetizing assets), or if Colors is able to ramp up its ratings post
the storm that KBC has generated. Earnings drivers may emerge too, if
the company's losses from movie business (Rs 200 mn in 2QFY12) reduce
in the coming quarters. We upgrade the stock to BUY with a (12-month,
DCF - based) price target of Rs 65.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
TV18 BROADCAST LTD
PRICE: RS.44 RECOMMENDATION: BUY
TARGET PRICE: RS.65 FY13E P/E: 46.4X
q TV18 Broadcast results were ahead of our estimates on account of stronger
performance from news channels of the company, which offset (continued)
unexpected losses in the movie business of the company. The
company reported revenues Rs 3020 mn, and PAT (loss)Rs 81 mn for the
quarter. The balance sheet of the company is stable with net debt of Rs
6.8Bn in the quarter (versus Rs 6.7Bn in 1QFY12).
q Weakening advertising environment, intense competition in the Hindi
GEC space, force cuts in our estimates for FY12/ FY13. We believe the
company shall bring in (adjusted) EPS Rs 0.2 in FY12 (prior est: Rs 1.0)/ Rs
0.9 in FY13. As such medium-term profitability outlook has weakened
substantially. The company's decision to defer the launch of a Hindi
movie channel shall also impact the traction that the company can gain
in subscription revenues over the medium to long term. We cut our longterm
assumptions on subscription revenues of the company, and estimate
the fair value of the stock at Rs 65 (Rs 78 earlier).
q Even so, we believe that investor concerns on the debt of the company
have brought the stock to rather cheap valuations, at 1.5x EV/ Sales
FY13E. We believe TV 18 is exposed to various positives, including
changes in regulatory environment (mandatory digitization) and longterm
scale up in subscription revenues (as long as Colors holds up to a
significant position in Hindi GEC sweepstakes). While the holding
company's debt, at Rs 14.3 Bn, is a matter of concern, we think there is
merit in the management's belief that the company's assets are top-ofthe
class, and current losses are not a reflection of their valuation.
q While recognizing that there may be significant near-term risks to an investment
in TV18 Broadcast on account of earnings , we also believe that
an asset view of the company suggests particularly weak valuations and
significant pessimism, at EV/ Sales of 1.5x FY13E. We are attracted by the
potential for the stock to provide large returns, if concerns on debt of
the parent subside (likely, given pressure on the management to act towards
monetizing assets), or if Colors is able to ramp up its ratings post
the storm that KBC has generated. Earnings drivers may emerge too, if
the company's losses from movie business (Rs 200 mn in 2QFY12) reduce
in the coming quarters. We upgrade the stock to BUY with a (12-month,
DCF - based) price target of Rs 65.
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