Buy TV18 Broadcast - Fairwealth Institutional Research

The government liberalized foreign investment (FDI) in the broadcasting sector. The Cabinet Committee on Economic Affairs (CCEA) raised foreign investment limit from 49% to 74% in teleports (setting up up-linking HUBs/teleports), Direct to Home (DTH), Cable Networks (Multi-System-Operators operating at National or State or District level and undertaking upgradation of networks towards digitalization and addressability). In respect of Cable Networks (Other Multi-System-Operators not undertaking up-gradation of networks towards digitalization and addressability and Local Cable Operators), the existing limit of 49% foreign investment, under the automatic route, would continue. The CCEA has allowed foreign investment (FI) up to 74% in mobile TV.

Investment Thesis:

- Digitization of cable TV is expected to boost the subscription revenues for broadcasters as it will end the hefty carriage fee paid to cable TV operators. At the same time, the Government has assured the cable TV operators that digitisation would not hurt them.

- Rights issue process over - Positives for the company: Recent Successful completion of Right issue of Rs. 27 bn will support the company in ETV acquisition and reduce its debt. These developments are likely to provide TV18 strength in terms of business and re-rating in terms of investors' point of view. Phase -1 of DAS rollout has been kicked off, as of Nov 1, and while there are irritants in certain areas, we believe the intent of the government is sound.

- Q2FY13 Results: TV18 reported revenues Rs 363cr, up 24% (yoy) and EBITDA Rs 14.41cr, down ~29% (yoy). The company incurred losses of Rs 40.6cr on the back of higher interest cost which came in at Rs 49.1cr as on Q2FY13. Significant changes made by the company in reporting relating to subscription revenues, makes comparison on subscription revenues difficult. Advertising revenues grew strongly on sequential basis while remains flat on a yoy basis.

Valuation: At CMP of Rs 29, we recommend Buy on TV18 with the target price of Rs 45, implying 55% upside.

Source : Equity Bulls

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