IBN18 Broadcast SEL- News business, a drag Rs117 :: ICICI Sec

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IBN18 Broadcast SELL
Maintained
News business, a drag Rs117
Reason for report: Q2FY11 results review


IBN18’s Q2FY11 results were in line with expectations as the entertainment
business surprised positively on the revenue front and the news business
negatively, posting higher losses. Viacom18’s revenues grew 36% YoY to Rs2.7bn
and EBITDA stood at Rs220mn. Lack of disclosure on revenue break-up (between
advertising and subscription), which is an industry practice, leaves little scope for
further analysis. The news business continued to drag profitability, posting
Rs109mn EBITDA losses – revenue growth lagged cost escalation. The economics
of general news business continue to be challenging, even for market leaders,
which is worrisome. Business news operations witnessed some traction owing to
heavy primary market calendar. The restructuring of the Network18 group is likely
to get completed by March ’11. We maintain SELL owing to expensive valuations
and poor outlook on news operations.
􀁦 News – Poor performance continues; EBITDA losses increase. Revenues from
news operations – CNN IBN + IBN7 + IBN Lokmat – declined 2.5% QoQ but
increased 31.8% YoY to Rs546mn, lower than our estimates of Rs604mn. EBITDA
losses widened to Rs109mn in Q2FY11 as against Rs96mn loss in Q1FY11. PAT
loss stood at Rs231mn in Q2FY11.
􀁦 Viacom18 – Strong performance. Viacom18’s revenues rose 14.3% QoQ and
36.4% YoY to Rs2.7bn in Q2FY11, largely led by strong ad revenue growth in spite
of a seasonally weak quarter. Viacom18 reported positive EBITDA for the fourth
straight quarter at Rs220mn, implying a margin of 8.1%. We expect both revenues
and costs to rise in Q3FY11 due to festive season demand and high content cost,
led by rise in big–ticket programming and aggressive acquisition of movie rights.
􀁦 TV18 news operations – In line. Revenues rose 5% YoY and 6.3% QoQ to
Rs680mn. EBITDA margin expanded 680bps in Q2FY11 to 30.9% from 24.1% in
Q1FY11. The company reported Rs210mn EBITDA in Q2FY11, an increase of 36%
QoQ. The management has guided that margins will be maintained at ~30% levels in
the next two quarters.