What will major media companies deliver in the first quarter of FY09? Vikash Mantri, CFA at ICICI Securities, does an analysis preview of all media companies and finds out that Q1-FY09 could be the first quarter where one would see a deceleration in advertisement revenue growth. "Despite margin pressures, we see a significant earnings momentum in Zee News, ENIL and Jagran Prakashan," he said.

Excerpts from CNBC-TV18's exclusive interview with Vikash Mantri:

Q: The industry is talking about a slowdown in ad revenues. What is it that you are working with at this point in time and how much of that can trickle down to the bottomline growth of most of the media companies?

A: We believe that Q1-FY09 could be the first quarter where we would see a deceleration in advertisement revenue growth. This is on the back of the last four years where we have seen a 20-22% growth across all mediums. So this is the first quarter where we believe that given the sluggishness in the economy, most media companies will see a deceleration of growth.

Breaking it down, we expect print and broadcasting to be the first sector to see 18-20%, where we have earlier seen significant growth of 30% based on expansion. Overall our estimate for FY09 of a 20-22% advertisement growth, but now given the sluggishness in the economy, we expect it to be somewhere in the region of 16-18%.

Earlier a significant slowdown in the economy's advertisement revenue growth post the IT burst lead to a decline in growth. We do not expect that purely because if significant growth is coming in new sectors like telcos and organised retailing, advertising, nevertheless we believe that this quarter we will see a slowdown in case of most companies.

What is also more important is we will see a deceleration or programming cost or newsprint cost going high, which will mean there will be margin squeeze for most of these companies in the media space.          

Q: What would be your picks in this sector?

A: Inspite of margin pressure, we see a significant earnings momentum in case of Zee News and ENIL (Entertainment Network India) - our top picks and also Jagran Prakashan, though we believe FY09 will be a slow growth year because of newsprint costs affecting the bottomline. But we believe there are significant growth opportunities post that. So our top picks would be Jagran Prakashan, ENIL and Zee News. ENIL and Zee News purely based on the strong earnings momentum that we expect from these two companies.  

Disclosure:

I do not hold, but we have been recommending our clients the stocks mentioned.