Buy NDTV, target Rs 453: HDFC Securities

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Buy NDTV, target Rs 453: HDFC Securities

HDFC Securities is bullish on NDTV and has maintained market performer rating on the stock wiht target price of Rs 453.

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HDFC Securities is bullish on NDTV and has maintained market performer rating on the stock wiht target price of Rs 453. 

HDFC Securities research report on NDTV

NDTV Networks recently launched (Sept '07) its lifestyle channel 'NDTV Good Times'. It was launched in collaboration with Kingfisher, which paid Rs.1 billion to enter into a 5-year deal with the channel. It is a win-win proposition for both the parties. NDTV has an anchor for its new channel while Kingfisher, which did not have a presence in the media space, gets visibility.

Apart from the lifestyle channel, NDTV is also planning to launch other verticals including a General Entertainment Channel (GEC) and a kids' channel. It also plans to start NDTV Media services (MPO), NDTV Convergence, which will house all the dotcom and mobile properties of the NDTV group and NDTV Labs. A city specific channel, Metro Nation, is also on the anvil. 

The base business of the company is expected to report a growth in revenues of 23% CAGR between FY07-09E from Rs.2785 million in FY07, to Rs.4223 million in FY09E. We also expect operating margins to expand by approx 970 bps between FY07-09E from 11% to approx 20%. Despite competition from rival channels, we believe NDTV will continue on its growth trajectory with increasing pay revenues and hikes in Ad rates of approx 15% YoY for FY08E and FY09E respectively.

Outlook and Valuation

We expect news operations to report revenue CAGR of 23% for FY07- 09E. Earnings are expected to come into the green in FY08E, with profits of Rs.216 million, against a loss of Rs.147 million in FY07. We value news operations at 4x FY09E M-Cap/Sales and NDTV Networks at 70% of its pre-money capitalization value of D380 million. We maintain a 'Marketperformer' rating with a positive bias and a target price of Rs.453.