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Media (Pratish Krishnan)
Overweight
Key drivers of sector outlook
Long term story intact, near term headwinds from weak macro: Expect ad growth
environment to be challenging in 2H led by deterioration in Macro. Forecast YoY
decline in ad revs for zee in FY12E and 8% YoY growth for Sun TV. For Print media
companies we have assumed 10-15% YoY growth, largely led by traction in retail
advertisers. While ad growth is reminiscent of 2008-9, valuations are unlikely to
correct to 2009 levels, given the much healthier balance sheets and financial metrics.
Potential upside from digitalization: Recently the Cabinet approved the digitalization
bill through an ordinance measure. The bill mandates compulsory transition of all
analogue networks to digital over the next four years. This is likely to improve
transparency levels in the system, leading to higher subscriber revenue for
broadcasters such as ZEE and multisystem operators such as Hathway. See
accelerated adoption of digital TV, which could lend upside to our subscriber
assumptions for Dish TV.
Favorable demographics: More than two-thirds of Indian population is below the age
of 35 years, which represents the major consuming class. Besides, growing
education levels and urbanization add to a favorable demographic profile.
Scope for margin expansion: Expect margins to expand, driven by pickup in ad
revenue, increasing subscription revenue and likely moderate growth in content cost.
Buys: Dish TV, DB Corp, ZEE, Hathway, Jagran
Top stock pick: Dish TV & DB Corp
We like Dish TV given our view that the subscriber base could potentially double
over the next five years, led by increasing spends on entertainment, bandwidth
constraints with analogue network & potential regulatory push which mandates
the transition of analogue to digital networks across the country. Dish unlikely to
be hit by macro slowdown in our view.
Forecast strong 54% CAGR in EBITDA over FY11-14E, led by subscriber growth
and content cost leverage; and
Expect net income to turnaround in 4Q FY12 and FCF in FY13E. Consequently,
we believe Dish TV would now be able to fund growth through internal accruals,
a key positive given our view that peers are likely to reel under losses for 2-3
years or more and may face funding challenges.
In print media, we prefer DB Corp given its strong earnings growth potential,
diversified revenue mix and our view that higher investments made in market
expansion should help drive faster ad growth than peers. Forecast EPS CAGR
of 27% over FY12-14E.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Media (Pratish Krishnan)
Overweight
Key drivers of sector outlook
Long term story intact, near term headwinds from weak macro: Expect ad growth
environment to be challenging in 2H led by deterioration in Macro. Forecast YoY
decline in ad revs for zee in FY12E and 8% YoY growth for Sun TV. For Print media
companies we have assumed 10-15% YoY growth, largely led by traction in retail
advertisers. While ad growth is reminiscent of 2008-9, valuations are unlikely to
correct to 2009 levels, given the much healthier balance sheets and financial metrics.
Potential upside from digitalization: Recently the Cabinet approved the digitalization
bill through an ordinance measure. The bill mandates compulsory transition of all
analogue networks to digital over the next four years. This is likely to improve
transparency levels in the system, leading to higher subscriber revenue for
broadcasters such as ZEE and multisystem operators such as Hathway. See
accelerated adoption of digital TV, which could lend upside to our subscriber
assumptions for Dish TV.
Favorable demographics: More than two-thirds of Indian population is below the age
of 35 years, which represents the major consuming class. Besides, growing
education levels and urbanization add to a favorable demographic profile.
Scope for margin expansion: Expect margins to expand, driven by pickup in ad
revenue, increasing subscription revenue and likely moderate growth in content cost.
Buys: Dish TV, DB Corp, ZEE, Hathway, Jagran
Top stock pick: Dish TV & DB Corp
We like Dish TV given our view that the subscriber base could potentially double
over the next five years, led by increasing spends on entertainment, bandwidth
constraints with analogue network & potential regulatory push which mandates
the transition of analogue to digital networks across the country. Dish unlikely to
be hit by macro slowdown in our view.
Forecast strong 54% CAGR in EBITDA over FY11-14E, led by subscriber growth
and content cost leverage; and
Expect net income to turnaround in 4Q FY12 and FCF in FY13E. Consequently,
we believe Dish TV would now be able to fund growth through internal accruals,
a key positive given our view that peers are likely to reel under losses for 2-3
years or more and may face funding challenges.
In print media, we prefer DB Corp given its strong earnings growth potential,
diversified revenue mix and our view that higher investments made in market
expansion should help drive faster ad growth than peers. Forecast EPS CAGR
of 27% over FY12-14E.
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