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Research and broking firm Edelweiss Securities has come up with its Q1 earnings forceast for the media sector wherein it estimates revenue and EBITDA excluding Dish TV to jump 12.7 percent (11.7 percent in Q4FY18) and 18.1 percent YoY (14.4 percent in Q4FY18), respectively, in Q1FY19.
This is expected to be led by broad-based revival in ad spends and a soft base. We estimate the overall ad industry to report low double-digit growth. Subscription revenue of TV broadcasters is expected to clock low-teen growth benefiting from renegotiation of deals.
It expects Q1FY19 to be a decent quarter for multiplexes aided by strong movies like Baaghi 2, Race3, Raazi & Avengers–Infinity war and screen expansion. Print companies are expected to initiate cost rationalisation measures such as increasing mix of domestic newsprint/reducing pagination to soften impact of high newsprint cost.
Ad growth likely to be robust for most players
Edelweiss expects Zee Entertainment to clock 18 percent YoY ad growth on a comparable base of 6.9 percent growth. It estimates Sun TV Network to report 19 percent YoY ad growth on a low base of 4.1 percent YoY dip, primarily due to low base and ad revival.
PVR is likely to report 2-3 percent YoY increase in overall footfalls and 20 percent YoY ad growth in Q1FY19, while DB Corp is estimated to report 10 percent YoY standalone print ad growth. Jagran Prakashan is likely to report 4 percent YoY growth in print ads. Radio City is expected to report robust 10 percent YoY ad growth on a base of 11.9 percent led by volume growth in new stations and higher yield in legacy stations.
Dish TV is expected to report consolidated numbers and hence not comparable YoY. Margins expected to be a mixed bag. Edelweiss expects Zee to report flattish YoY EBITDA margin of 31.3 percent in spite of higher investment in programming hours. Sun TV is expected to report 65 percent EBITDA margin (up 800bps YoY) due to the IPL revenue serving as an additional trigger.
PVR is estimated to report 18.3 percent EBITDA margin, up 70bps YoY. Higher newsprint cost is likely to dent margins of print companies . Dish TV is expected estimated to report 28.2 percent EBITDA margin (27.2 percent in Q1FY18).
Outlook for the next 12 months
According to a report by Edelweiss, competition has intensified in Tamil GEC (Zee Tamil has gained share, Colors Tamil launched). Recent court order directing the Maharashtra government to frame an F&B policy for multiplexes poses a threat to the revenue of multiplexes; if implemented. It believes that the other states may follow the suit.
The research firm believes, TRAI’s tariff order will create a level-playing field in the TV space. However, its implementation remains a key monitorable. Competition in the OTT space is expected to further intensify as Zee5 is on track to host over 90 plus original shows by March 2019.
Edelweiss has top picks including Zee Entertainment Enterprises, Sun TV Network and PVR.
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