Print set to surge as TRAI rule slows broadcasters
We expect Q3FY14 results to be divergent, with print companies set to
post healthy ad revenue growth and margin expansion, while
broadcasters should get impacted by TRAI (10+2) rule and high sports
losses (for ZEEL) coupled with margin compression. Digitization
benefit will accrue to broadcasting players with Dish TV’s subscriber
addition remaining high on festive season demand. Among
non-broadcasters, margins are expected to expand with internet
companies demonstrating strong operating leverage. We expect positive
surprise from Jagran Prakashan, Dish TV and ENIL but negative surprise
from ZEEL and Sun TV Network.
$ Festive season and elections to benefit ad growth: Advertisement
growth for the industry could remain strong on the back of festive
season demand and state elections while the full impact of TRAI’s
(10+2) inventory cap will be felt during the quarter. Print companies
will benefit from elections boosting ad growth with Jagran and HT
Media expected to post 11.7% and 7% YoY ad growth respectively. Sun TV
will get impacted by the TRAI rule and hence we have modelled a 4%
decline while ZEEL may post 7% ad growth (ex-sports). ENIL may report
an 11% YoY ad growth on the back of inventory utilisation.
$ Digitization benefits to continue: ZEEL is expected to post a growth
of 13% YoY in domestic subscription revenues while Sun TV is likely to
grow analog subscription revenues by 35% and DTH by 17.5% YoY. Dish
TV’s gross subscriber addition is expected to be healthy at 0.75mn
while ARPU will remain at Rs166. Circulation revenue growth for print
players will be healthy with Jagran and HT Media growing at 11.7% and
9.7% respectively on the back of increase in circulation and price
hikes. The impact of the cut in cover price in Bihar market will be
felt during the quarter for both print players.
$ Operating margins to compress: Margins are expected to compress by
151bps YoY for our coverage companies. Broadcasters like Sun TV and
ZEEL’s OPM will compress on the back of lower advertisement growth
(for Sun TV) and high sports losses (for ZEEL). However, Jagran and HT
Media’s margins are set to expand by 102bps and 18bps respectively.
Internet companies will also post margin expansion on the back of
operating leverage. Hence, operating profit for our coverage universe
is set to grow by 6.3% YoY and PAT by 9.9% YoY.
$ Recommendation & key risks: We have increased our target price for
Just Dial (Hold) while downgrading Dish TV to Hold on the back of a
steep rally in the stock price in the past three months. We maintain
Buy rating on Jagran Prakashan, Sun TV Network and HT Media but Hold
on Dish TV, ENIL, Info Edge, ZEEL and Just Dial. Key risks to our call
will be 1) Delay in digitization, and 2) the TRAI (10+2) rule.
Thanks & Regards.
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We expect Q3FY14 results to be divergent, with print companies set to
post healthy ad revenue growth and margin expansion, while
broadcasters should get impacted by TRAI (10+2) rule and high sports
losses (for ZEEL) coupled with margin compression. Digitization
benefit will accrue to broadcasting players with Dish TV’s subscriber
addition remaining high on festive season demand. Among
non-broadcasters, margins are expected to expand with internet
companies demonstrating strong operating leverage. We expect positive
surprise from Jagran Prakashan, Dish TV and ENIL but negative surprise
from ZEEL and Sun TV Network.
$ Festive season and elections to benefit ad growth: Advertisement
growth for the industry could remain strong on the back of festive
season demand and state elections while the full impact of TRAI’s
(10+2) inventory cap will be felt during the quarter. Print companies
will benefit from elections boosting ad growth with Jagran and HT
Media expected to post 11.7% and 7% YoY ad growth respectively. Sun TV
will get impacted by the TRAI rule and hence we have modelled a 4%
decline while ZEEL may post 7% ad growth (ex-sports). ENIL may report
an 11% YoY ad growth on the back of inventory utilisation.
$ Digitization benefits to continue: ZEEL is expected to post a growth
of 13% YoY in domestic subscription revenues while Sun TV is likely to
grow analog subscription revenues by 35% and DTH by 17.5% YoY. Dish
TV’s gross subscriber addition is expected to be healthy at 0.75mn
while ARPU will remain at Rs166. Circulation revenue growth for print
players will be healthy with Jagran and HT Media growing at 11.7% and
9.7% respectively on the back of increase in circulation and price
hikes. The impact of the cut in cover price in Bihar market will be
felt during the quarter for both print players.
$ Operating margins to compress: Margins are expected to compress by
151bps YoY for our coverage companies. Broadcasters like Sun TV and
ZEEL’s OPM will compress on the back of lower advertisement growth
(for Sun TV) and high sports losses (for ZEEL). However, Jagran and HT
Media’s margins are set to expand by 102bps and 18bps respectively.
Internet companies will also post margin expansion on the back of
operating leverage. Hence, operating profit for our coverage universe
is set to grow by 6.3% YoY and PAT by 9.9% YoY.
$ Recommendation & key risks: We have increased our target price for
Just Dial (Hold) while downgrading Dish TV to Hold on the back of a
steep rally in the stock price in the past three months. We maintain
Buy rating on Jagran Prakashan, Sun TV Network and HT Media but Hold
on Dish TV, ENIL, Info Edge, ZEEL and Just Dial. Key risks to our call
will be 1) Delay in digitization, and 2) the TRAI (10+2) rule.
Thanks & Regards.
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