Media - Sluggish Quarter: Laying Growth Foundation; Result Preview Q2FY15 :: Edelweiss, PDF link

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In Q2FY15, we expect Edelweiss Media universe’s revenue to grow 7.2% YoY (8.9% YoY in Q1FY15), though EBITDA is likely to decline 4.2% YoY (flattish in Q1FY15). Ad growth for the TV industry in Q2FY15 likely grew at 10-11% YoY (as per our channel checks) and slipped 200-300bps vis-à-vis Q1FY15 due to absence of election-related ad spends. Ad growth for ZEE and Sun TV (Sun TV is likely to see close to double digit growth after 5 quarters) is expected to be better than most of the listed print peers like Jagran Prakashan, which continue to clock single digit growth. Cable subscription revenue growth for broadcasters and MSOs is expected to be subdued. Set-top box activations for MSOs are expected to be slow due to extension of Phase 3 and 4 deadlines. EBITDA growth of Sun TV and Dish TV is expected to be higher than the sector average.            

Q2FY15 result expectations for the sector

We expect 13% YoY ad growth for ZEE on a base of 10.5% YoY. Low ratings in non-fiction content in Q1FY15 could hamper ZEE’s ad growth in Q2FY15 (lag effect). We expect it to report INR200-250mn sports loss during the quarter. Sun TV's ad growth is expected to recover to ~10% YoY due to low base (4.3% YoY decline). While Dish TV’s ARPU is expected to be ~INR171-172, gross subscriber additions are expected to be 0.6mn (similar to Q1FY15). With extension in deadlines for Phases 3 and 4, focus of MSOs has shifted to expansion of broadband. Like-to-like footfall growth was muted for PVR in Q2FY15 as there were no hit movies in September. Box-office collections were decent in July and August due to movies like Kick and Singham-2.

Key highlights of the sector during the quarter

The Ministry has postponed the Phase 3 digitisation deadline by a year to December 31, 2015, and that for Phase 4 by 2 years to December 31, 2016. GroupM has revised upwards India’s overall CY14 ad growth forecast by 90bps to 12.5% YoY. DEN has signed a 50:50 JV with Snapdeal to start a home shopping TV channel at an investment of USD1mn each. DEN’s CEO Mr. S N Sharma, who was one of the founding members of DEN, has recently quit the company for personal reasons.

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