Media ƒ Broadcaster advertisement revenue to grow at a slower pace…ƒ :Q3FY15 Result Preview : ICICI Securities, report

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ƒ Broadcaster advertisement revenue to grow at a slower pace…
Ad revenue for broadcasters is expected to grow at a relatively lower
pace due to lower spends from various categories amid tepid economic
recovery. Zee/Sun TV/TV Today would report ad revenue growth of
11.9/6.0/11.4%. Despite the month of October being festival heavy, the
ad growth remained subdued. SUN TV may witness recovery in ad
growth after posting either negative or lower single digit ad growth in
the last year. However, overall economic scenario remains grim and the
ad growth improvement would only be a gradual process. We expect
our media universe to post a YoY and QoQ revenue growth of 8.9%
and 12.8% respectively.
ƒ Print continues to be subdued despite the festive quarter….
Ad revenue growth for the quarter is expected to be limited to 7.0%
YoY across the print companies in our coverage universe. Ad growth
for DB Corp would be limited to 7% on account of high base due to
election led spending in Q3FY14, while HT Media would be impacted by
slower growth in English ad even though Hindi ads would grow in early
teens. On the positive side though, the newsprint prices have declined
in the quarter with newsprint costs benefit of 1-2% across players
hence clocking EBITDA margins of 30.6/19.0% for DB Corp/HT Media in
the quarter. The Russian newsprint have been diverted to India post its
ban in Europe. The Russian newsprint is relatively cheaper in addition
to the freight costs being lower. The industry is likely to benefit from
lower newsprint costs in the foreseeable future.
ƒ STB seeding expected to remain in line with the previous quarter
The deadline for the Phases III & IV of digitization has been deferred and
hence the set top box is expected to follow the run rate similar to the
previous quarters. We expect Hathway to seed about 120000 STBs in
Q3FY15 on standalone basis. Dish TV is expected to add 0.41 million
net subscribers, while its ARPU would expand by 1.0% QoQ to | 174.0.
MSO’s have yet not fully shifted towards package wise billing in Phase I
& II cities; they expect the implementation by Q4 onwards.
ƒ A number of hits at the Box office in the quarter…
The box-office had several hits in the quarter with movies such as Bang
Bang, Happy New Year, PK, Interstellar etc faring exceedingly well at
the box-office. Such a performance will be reflected in PVR’s quarterly
performance, which is expected to post ~21% YoY increase in the total
footfalls to 17.3 million, a 8.0% & 26.0% YoY growth in the ATP & F&B
Spends Per Head to | 184.6 & | 67.1 respectively.

Company specific view (Media)
Company Remarks
DB Corp DB Corp would post 7% advertisement growth on account of high base since Q3FY14
had benefit of election led spends in Madhya Pradesh, Chattisgarh and Rajasthan.
However, softening newsprint prices will benefit EBITDA margins which are expected
to expand by 67 bps to 30.6%.
Dish TV Gross subscriber addition would be ~0.6 million, with net adds of 0.41 million and
churn of 0.22 million (0.6% monthly of net base). ARPU is expected to show a 1.0%
QoQ increase to | 174. Margins are expected to decline by ~20 bps QoQ to 23.9%.
ENIL We expect ad revenues to grow 16.5% YoY to reach | 114.4 crore. We expect margin
to remain at 36.3%, up 594 bps on account of seasonally strong quarter, though on a
YoY basis it will decline by 249 bps due to higher promotional and employee cost in
buildup to Phase III auctions. Utilization is expected to increase to 97.8% as compared
to 88.8% in same quarter last year. The management remains optimistic on the
timeline of the Phase III auctions and expects it to take place in the ongoing fiscal.
Eros
International
Eros would post 7.7% topline growth with movies like Kaththi (Tamil), Happy Ending,
Action Jackson and Linga (Tamil) released during the quarter. Though most of the
movies fell short of expectations on the box office, Eros generated decent returns on
account of presales to distributors and satellite rights sales. Also, it is expected to
generate another | 30 – 40 crore from catalogue sales. We expect a margin of
~27.9% falling 340 bps from Q3FY15 which had movies like Jai Ho, One (Telugu),
Ramleela & Krishh 3 (overseas).
HT Media Even in seasonally strong quarter, advertisement growth has not picked up on
account of slow revival in the economy. English advertisement is expected to grow by
4.5% to | 328.3 crore, while Hindi ad growth would be 13% to | 155.4 crore, resulting
in a blended print advertisement growth of 7.1%. Circulation revenues would grow by
10.2% to | 73.3 crore on account of increased copies and higher cover price. The
newsprint costs are expected to decline due to softness in international market,
resulting in EBITDA margin expansion of ~439 bps YoY to reach 20.7% in this quarter.
Hathway
Cable
Subscription income would decline by | 10 Crore QoQ on account of net billing in
Delhi, however, it will be EBITDA neutral since LCO commission will not be a part of
costs. On a like to like basis subscription income would increase by | 4 crore to reach
| 100 crore on account of STB seeding of 0.12 million. With Zee (Half Quarter) and
Star Network moving to RIO deals, pay cost would be down by Rs 4 crore, but
placement revenue would fall by Rs 9 crore. The broadband revenues are expected to
grow 8% QoQ to | 49 crore. The EBITDA margins would fall to 9.2%, a 618 bps
reduction QoQ due to lower placement revenue
PVR The quarter is expected to be a stellar one for PVR with several movies such as Bang
Bang, PK, Interstellar, Happy New Year faring quite well at the box office. PVR is
expected to witness about 21% YoY incresae in the total footfalls to 17.3 million as
the footfalls per screen would increases by 4.0% YoY to 37.5 ('000). Cashing in on the
popular movies in the quarter, we expect PVR to take an ATP and F&B hike of about
8.0% and 26.0 %YoY hike in the ATPs and F&B spends per head to reach | 184.6 and
| 67.1 respectively. PVR is hence expected to post about 29.7% YoY increase in its
total operating revenues to about | 437.3 crore. The strong growth in the revenues
would bring in higher operating leverage, leading to an EBITDA margin expansion of
about ~252 bps to 17.1% on a YoY basis. The company is expected to report a PAT of
| 22.0 crore in the quarter.
Source: Company, ICICIdirect.com Research

: Company specific view (Media)
Company Remarks
Sun TV Sun TV is expected to post an advertisement revenue growth of 6.0% as it recovers
from its negative growth seen last year. Subscription revenue though growing 9% YoY
would remain flat sequentially. The company is expected to post EBITDA margins of
about 75.5% clocking an EBITDA of about | 413.4 crore.
TV Today
Network
The ad revenues for TV Today is expected to post a 11.4% YoY ad revenue to reach |
110.0 crore in ad revenues owing to its higher news viewership on back of several
initiatives by the new Government. The subscription revenues are expected to post a
single digit growth of 7.0% to | 8.9 crore. The subscription growth would post a steep
rise only once there is a ramp up in the remaining phases of digitization. The radio
segment is expected to post a robust 8.3% YoY ad revenue growth to | 4.7 crore. The
company is expected to post an EBITDA margin of about 29.5% clocking an EBITDA of
| 36.5 crore in the quarter,
Zee
Entertainment
Zee is expected to post an advertisement revenue growth of about 11.9% YoY to |
765.8 crore which was buoyed by the festive month of October. The domestic
subscription revenue growth is expected to remain subdued at about 3.5% YoY on
account of lower activity on digitization front. The sports losses are expected to inch
upwards in the quarter and we have built in sports losses of about | 32.7 crore in the
quarter. The EBITDA margins are however expect to contract by about 226 bps YoY to
reach 22.2% on account of higher programming expenses in the quarter as a result of
new shown in the non-fiction as well as fiction category.
Source: Company, ICICIdirect.com Research

LINK
http://content.icicidirect.com/mailimages/IDirect_ConsolidatedPreview_Q3FY15.pdf