Anand Rathi bets on media sector; picks Sun TV, Zee, TV18

Brokerage firm Anand Rathi is buoyant about the Indian media sector. Digitisation across the country has resulted in huge investment in the media sector, which is likely to translate into higher revenues for the entire value chain of the sector, Yogesh Kirve of Anand Rathi told CNBC-TV18.

Sun TV, Zee Entertainment and TV18 Broadcast are his top picks from the media counters. He is also bullish on Dish TV, after recent increase pack price by the company. 

"We believe there is lot of juice left in this sector," he said.

Currently the second phase of digitisation is in progress. As per ministry of Information and Broadcasting data, a total of 5.9 million analogue TV homes are yet to be installed with set-top boxes (STBs) in the 38 cities under the second phase which has a deadline of March 31.

Kirve believes that phase II may witness delay of two-three months due to sheer scale. As per the data available, out of 16.01 million TV homes, a total of 6.21 million homes have received cable STBs, while 4.2 million have been installed with direct-to-home (DTH ) boxes.

Government firm on March 31 deadline for Phase II of digitisation

Below is the verbatim transcript of the interview

Q: 55 percent of digitization target has been achieved in the second phase and now we will have yet another phase kicking in. Upfront do you think there is still some juice left in media stocks because of the digitization effort?

A: We believe there is lot of juice left in this sector. There is lot of investment that has happened in this sector over the last 12-18 months and this all should translate into higher revenue for the entire value chain. Especially, for the multi-system operators (MSOs) and the DTH companies as well as the broadcasters. So we are positive on this sector.

Q: Dish TV has managed to increase the set-top box price twice so far recently and now there is expectation that they will be able to pull through with a subscriber pack increase as well. Do you see it likely and what kind of a positive impact if it happens?

A: It has positive implication both on the revenue front as well as on the EBITDA. It is a clear signal to the market that the company wants to position its product and is offering as a premium or differentiated. So unlike multi-system operators they are not going into a very aggressive subscriber acquisition. Apart from improve the realizations and margin this should help the company to keep its activity under check.

Q: Have you started seeing the early impact of digitization on the subscriber revenues of broadcasting companies, have you upgraded the earnings of any of the broadcasting companies in your coverage?

A: As far as revenue for the broadcaster is concerned it has not yet kicked in fully. What has essentially happened in the month of November or December, the broadcasters have renewed their agreements with the MSOs and the DTH companies but they do not fully factor in the benefits of digitization.

So in the sense we have not yet moved to a per subscriber kind of billing or revenue arrangement. So when that comes in we would see a major kicker coming in. So right now we would see only a partial benefit that would appear in Q4 and probably by Q2 of FY14 we could see a full impact.

Q: Which are your top picks in the entire media space and what is the kind of target price and the timeline over which you expect these returns?

A: Within media space our preference is for the broadcasters and within broadcasters we like Sun TV. So our target price is Rs 500 for Sun TV and our time frame is one year. This is followed by Zee Entertainment and TV18 Broadcast.

Q: On Dish TV what would the target price be?

A: Our target price is Rs 75 so based on our current target price the upside appears to be capped. So we are neutral at this point of time.

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