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MEDIA
Q3 FY12 shall see modest topline growth, on the back of a strong base, as
well as weakness in consumption and (in part, consequently) advertising
intensity. Advertising expenditures have been particularly weak from the
real estate and BFSI sectors in the recent past, and this trend is expected to
continue in 3QFY12. We believe demand from FMCG advertisers is likely to
have been firm this quarter. Expenditure growth from local advertisers is
likely to stay stronger than national advertisers. We expect newspaper
publishers in our coverage universe to have advertising revenue growth in
the range of 8-10% in the quarter. Although overall industry growth among
TV broadcasters is likely to have been in high single digits, we think that
the emergence of Sony at #2 is likely to have an impact on Hindi GECs.
Similarly, we believe higher competitive intensity in radio broadcasting is
likely to impact growth of ENIL. Overall, we estimate 7.3% y/y growth in
revenues of our media coverage universe.
Raw Material expenses shall continue to exert downward pressure on
newspaper publishers' margins. Domestic newsprint prices have remained
firm in the quarter (in line with 2QFY12), and while imported newsprint
prices in Indian currency would be higher, they are unlikely to have a major
impact in this quarter (HT Media, the most exposed company in our
coverage universe, has inventory at lower prices, and other publishers have
a low usage of imported newsprint). Expenses of broadcasters (ex-sports)
are likely to have risen stronger than revenues, either on account of higher
programming expenses, or marketing and distribution expenses, in an
environment of rising competition.
We expect average EBITDA margin in our coverage universe to decline 3.6
ppt in the quarter (y/y). On the back of these, we expect earnings de-growth
of 16% (y/y) in the quarter.
n DB Corp: We expect revenues of DB Corp to grow 8.5% y/y in the year. A large
part of the company's revenues are derived from local advertisers, which will
help the company offset weakness from realty and BFSI categories, which have
affected print media companies in the recent quarters. Although newsprint prices
are expected to remain in line with the last quarter (2QFY12), consumption of
newsprint is likely to have an impact of lowering margins. Margins are also likely
to see y/y declines on account of new editions of the company. We expect 8.2
ppt compression in EBITDA margins and 22% decline in PAT for 3QFY12 (y/y
comparisons).
n HT Media: HT Media's revenues shall continue to be affected by weakness in
advertising, especially in the Delhi-NCR region. Given higher exposure to metros,
the English newspapers shall also be impacted by weakness in real estate advertising
than Hindi peers. However, the company's strengthening readership in
Hindi, business newspapers, and Mumbai edition of HT is likely to counter the
weakness in advertising revenues from the Delhi-NCR region. The company's circulation
revenues are likely to continue to show growth on account of pricing
action as well as improved circulation. While HT Media is most exposed to imported
newsprint, the company has stated that 3QFY12 is unlikely to see impact
of depreciation in INR on account of inventory. We expect revenue growth of
13% and PAT growth of 0% for HT Media in 3QFY12 (y/y comparisons).
n Jagran Prakashan: We expect Jagran Prakashan's revenues to grow 8%, for
reasons similar to those provided for DB Corp. Although Jagran is expected to
benefit strongly from political advertising and has the best exposure to assembly
elections, we expect political advertising to have no impact on 3QFY12 results.
Higher newsprint expenses shall continue to have an impact on margins (expect
compression of 5.2 ppt y/y), considering that Jagran has been raising its circulation
in the recent past to shore up readership. We expect PAT Rs 449 mn, down
15% y/y.
n ENIL: Along with overall weakness in advertising expenditures, we believe ENIL
is likely to see an impact of rising competitive intensity in key metro markets.
While ENIL continues to be the #2/ #3 in Delhi, stronger competition has also
emerged in other metros (Mumbai and Bangalore), which is likely to impact pricing.
The last quarter (2QFY12) saw significant rise in marketing spends on the
company - we believe the trend is likely to persist as the company attempts to
improve its positioning, attract advertisers with value-added offerings. We expect
ENIL revenues to de-grow 3%, and PAT to de-grow 27% y/y.
n Zee Entertainment Enterprises Limited: Through 3QFY12, Zee TV, the flagship
channel of the company has been the #4 Hindi GEC, lagging behind Star,
Sony, and Colors. Zee Entertainment has also lost ground in Marathi GECs. Loss
of competitive position is likely to have impacted the company in the quarter,
leading to weak revenue growth. Y/Y comparisons shall also be weak on account
of one-off revenues reported in 3QFY10. Expect revenue de-growth of
8.5% y/y. We expect minor margin compression, and PAT de-growth of 3% for
Zee Entertainment in 3QFY12.
n Sun TV Network: Sun TV Network faces a high base on account of release of
Endhiran in 3QFY11. Further the company shall also report weaker analogue revenues
in the quarter on account of the issues that the company is facing in TN.
Expect advertising revenue growth to be stronger than the industry on account of
higher exposure to local advertising, which is likely to have remained on stronger
ground. We expect revenue de-growth of 21%, PAT de-growth of 12% (y/y
comparisons) for 3QFY12.
n TV18 Broadcast: Viacom 18 (50% JV of TV18 Broadcast) is likely to register
weak broadcasting revenues on account of weak pricing in the quarter - the ascent
of Sony to #2 position is the key factor, as in the case of Zee Entertainment.
TV18's margins are likely to continue seeing negative impact of new channel
launches (History, Sonic), affecting margins. We expect revenues of Rs 3140 mn,
and PAT Rs 95 mn for the quarter (y/y changes not meaningful on account of restructuring).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
MEDIA
Q3 FY12 shall see modest topline growth, on the back of a strong base, as
well as weakness in consumption and (in part, consequently) advertising
intensity. Advertising expenditures have been particularly weak from the
real estate and BFSI sectors in the recent past, and this trend is expected to
continue in 3QFY12. We believe demand from FMCG advertisers is likely to
have been firm this quarter. Expenditure growth from local advertisers is
likely to stay stronger than national advertisers. We expect newspaper
publishers in our coverage universe to have advertising revenue growth in
the range of 8-10% in the quarter. Although overall industry growth among
TV broadcasters is likely to have been in high single digits, we think that
the emergence of Sony at #2 is likely to have an impact on Hindi GECs.
Similarly, we believe higher competitive intensity in radio broadcasting is
likely to impact growth of ENIL. Overall, we estimate 7.3% y/y growth in
revenues of our media coverage universe.
Raw Material expenses shall continue to exert downward pressure on
newspaper publishers' margins. Domestic newsprint prices have remained
firm in the quarter (in line with 2QFY12), and while imported newsprint
prices in Indian currency would be higher, they are unlikely to have a major
impact in this quarter (HT Media, the most exposed company in our
coverage universe, has inventory at lower prices, and other publishers have
a low usage of imported newsprint). Expenses of broadcasters (ex-sports)
are likely to have risen stronger than revenues, either on account of higher
programming expenses, or marketing and distribution expenses, in an
environment of rising competition.
We expect average EBITDA margin in our coverage universe to decline 3.6
ppt in the quarter (y/y). On the back of these, we expect earnings de-growth
of 16% (y/y) in the quarter.
n DB Corp: We expect revenues of DB Corp to grow 8.5% y/y in the year. A large
part of the company's revenues are derived from local advertisers, which will
help the company offset weakness from realty and BFSI categories, which have
affected print media companies in the recent quarters. Although newsprint prices
are expected to remain in line with the last quarter (2QFY12), consumption of
newsprint is likely to have an impact of lowering margins. Margins are also likely
to see y/y declines on account of new editions of the company. We expect 8.2
ppt compression in EBITDA margins and 22% decline in PAT for 3QFY12 (y/y
comparisons).
n HT Media: HT Media's revenues shall continue to be affected by weakness in
advertising, especially in the Delhi-NCR region. Given higher exposure to metros,
the English newspapers shall also be impacted by weakness in real estate advertising
than Hindi peers. However, the company's strengthening readership in
Hindi, business newspapers, and Mumbai edition of HT is likely to counter the
weakness in advertising revenues from the Delhi-NCR region. The company's circulation
revenues are likely to continue to show growth on account of pricing
action as well as improved circulation. While HT Media is most exposed to imported
newsprint, the company has stated that 3QFY12 is unlikely to see impact
of depreciation in INR on account of inventory. We expect revenue growth of
13% and PAT growth of 0% for HT Media in 3QFY12 (y/y comparisons).
n Jagran Prakashan: We expect Jagran Prakashan's revenues to grow 8%, for
reasons similar to those provided for DB Corp. Although Jagran is expected to
benefit strongly from political advertising and has the best exposure to assembly
elections, we expect political advertising to have no impact on 3QFY12 results.
Higher newsprint expenses shall continue to have an impact on margins (expect
compression of 5.2 ppt y/y), considering that Jagran has been raising its circulation
in the recent past to shore up readership. We expect PAT Rs 449 mn, down
15% y/y.
n ENIL: Along with overall weakness in advertising expenditures, we believe ENIL
is likely to see an impact of rising competitive intensity in key metro markets.
While ENIL continues to be the #2/ #3 in Delhi, stronger competition has also
emerged in other metros (Mumbai and Bangalore), which is likely to impact pricing.
The last quarter (2QFY12) saw significant rise in marketing spends on the
company - we believe the trend is likely to persist as the company attempts to
improve its positioning, attract advertisers with value-added offerings. We expect
ENIL revenues to de-grow 3%, and PAT to de-grow 27% y/y.
n Zee Entertainment Enterprises Limited: Through 3QFY12, Zee TV, the flagship
channel of the company has been the #4 Hindi GEC, lagging behind Star,
Sony, and Colors. Zee Entertainment has also lost ground in Marathi GECs. Loss
of competitive position is likely to have impacted the company in the quarter,
leading to weak revenue growth. Y/Y comparisons shall also be weak on account
of one-off revenues reported in 3QFY10. Expect revenue de-growth of
8.5% y/y. We expect minor margin compression, and PAT de-growth of 3% for
Zee Entertainment in 3QFY12.
n Sun TV Network: Sun TV Network faces a high base on account of release of
Endhiran in 3QFY11. Further the company shall also report weaker analogue revenues
in the quarter on account of the issues that the company is facing in TN.
Expect advertising revenue growth to be stronger than the industry on account of
higher exposure to local advertising, which is likely to have remained on stronger
ground. We expect revenue de-growth of 21%, PAT de-growth of 12% (y/y
comparisons) for 3QFY12.
n TV18 Broadcast: Viacom 18 (50% JV of TV18 Broadcast) is likely to register
weak broadcasting revenues on account of weak pricing in the quarter - the ascent
of Sony to #2 position is the key factor, as in the case of Zee Entertainment.
TV18's margins are likely to continue seeing negative impact of new channel
launches (History, Sonic), affecting margins. We expect revenues of Rs 3140 mn,
and PAT Rs 95 mn for the quarter (y/y changes not meaningful on account of restructuring).
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