Stellar advertising growth and favourable newsprint prices set to aid growth
ICICI Securities expects good Q4FY15-16 results for media sector on the back of robust advertising growth for broadcasters and favourable newsprint prices for print players. It expects advertisement revenues to grow at 14% on a y-o-y basis and EBITDA (earnings before interest tax and depreciation) by 25% across their coverage universe.
Advertisement revenues for all media companies under coverage except DB Corp are expected to rise. Advertisement revenues for DB Corp are expected to fall marginally by 2.4%. Zee Entertainment is expected to deliver the highest growth in revenue at 24%, while Hindustan Media Ventures' advertisement revenues could grow by 16.3%. HT Media and Sun TV are expected to deliver single digit revenue growth at 7.2% and 5.6% respectively. In Q3FY15-16, Sun TV reported a low revenue growth of 2.3% due to Tamil Nadu floods. For print players, margins are expected to expand on the back of favourable newsprint prices.
Zee Entertainment's 24% revenue growth will come from strong ad spend environment, growth in regional market share and contribution of Zee Cine awards. There is expected to be an improvement in margins due to its low base. Its ex-sports margins are expected to expand by an impressive 900 basis points. All of Zee Entertainment's channels are expected to deliver improvement in market share except Zee Marathi as compared to the last quarter (Q3FY15-16). However, Zee Marathi already has a huge market share of 58.6%. Zee Sports will continue to be a drag on the bottom line and it is expected to deliver an EBITDA loss of Rs15.4 crore. Zee Entertainment trades at a PE of 38 based on trailing 12 months consolidated earnings.
Jagran Prakarshan is estimated to be the clear leader in terms of revenue growth at a little more than 23%. It has an impressive return on equity (RoE) of around 44% based on trailing 12 months earnings and is valued at a price-to-earnings multiple (PE) of a little more than 10. Jagran Prakarshan's advertisement revenue is expected to grow by a stellar 31%. It is a great brand and has massive reach across the Hindi heartland. However, the stock has not been able to deliver good returns in the past largely due to erratic growth in net profits.
On a sequential quarter basis, the revenue growth for the media sector is less impressive. Dish TV and Sun TV network are expected to show positive revenue growth on a sequential quarter basis, while revenues of other media companies are expected to decline. Sun TV’s revenues were hampered in the last quarter due to Tamil Nadu floods. Thus, low base effect comes into play while calculating sequential revenue growth.
Star Plus and Colors are the clear leaders in terms of market share based on Q4FY15-16. Star Plus accounted for around 22% market share, while Colors had 20.9% market share.
On the profitability front, all companies across its coverage universe are expected to deliver positive growth. The exception to this is Entertainment Network of India, with is expected to deliver flat EBITDA. Its PAT (profit after tax) is expected to fall by 33%.
Dish TV is likely to post strong subscriber additions, due to the deadline for Phase-3 of digitisation. Its gross subscriber additions are expected to increase by 5 lakh. Its Average Revenues per User (ARPU's) are expected to increase marginally by 2% on a q-o-q basis.