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M edia & Entertainment - India
Slow 1Q ad growth
1Q ad spends likely lower than anticipated
Channel checks with media planners indicate lower allocation of ad spends than
anticipated during 1Q, implying likely muted ad growth for companies under our
coverage. While 1Q is seasonally weak, macro concerns and strong ad spends
during 4Q across GEC and sports channels (World Cup and IPL) have impacted
ad spend allocations for the quarter. However, despite macro concerns
emerging, clients have currently committed to higher ad spends for the year. We
expect a recovery in the 2nd half, driven by the onset of the festive season.
Likely muted 1Q rev growth
For 1Q, we have assumed ~10% yoy ad growth for ZEE and 15% yoy ad growth
for print companies, such as DB Corp and Jagran. This compares with our
current assumption of ~9% growth for FY12 for Zee network (including a decline
in sports) and 14% yoy growth ex sports/regional channels. For DB Corp, we
currently project 17% yoy growth in ad revs for the year.
Margins likely to disappoint
We expect margins to disappoint on lower ad growth and investments in content/
new market expansion. ZEE has expanded its programming hours during the
quarter, which will likely impact margins. While we have factored in an annual loss
of Rs1bn from sports (vs. Rs2bn in FY11) for Zee, given the recent telecast of the
India–West Indies event, we expect asignificant share of the loss to be booked in
1Q. We expect margin pressure at print players, given expansion in to new
markets and increasing newprint costs. We forecast a 400bps yoy margin decline
for ZEE and a 1000bps yoy decline for DB Corp during the quarter.
Muted profit growth
Overall, we believe profit growth is likely to be muted across key companies. We
forecast 0-7% yoy growth for Zee, Jagran and Sun TV. DB Corp profits are
estimated to decline by 17% yoy.
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