Media - Q3FY14 Results Preview - Print set to surge as TRAI rule slows broadcasters - Centrum

We expect Q3FY14 results to be divergent, with print companies set to post healthy ad revenue growth and margin expansion, while broadcasters should get impacted by TRAI (10+2) rule and high sports losses (for ZEEL) coupled with margin compression. Digitization benefit will accrue to broadcasting players with Dish TV's subscriber addition remaining high on festive season demand. Among non-broadcasters, margins are expected to expand with internet companies demonstrating strong operating leverage. We expect positive surprise from Jagran Prakashan, Dish TV and ENIL but negative surprise from ZEEL and Sun TV Network.

Festive season and elections to benefit ad growth: Advertisement growth for the industry could remain strong on the back of festive season demand and state elections while the full impact of TRAI's (10+2) inventory cap will be felt during the quarter. Print companies will benefit from elections boosting ad growth with Jagran and HT Media expected to post 11.7% and 7% YoY ad growth respectively. Sun TV will get impacted by the TRAI rule and hence we have modelled a 4% decline while ZEEL may post 7% ad growth (ex-sports). ENIL may report an 11% YoY ad growth on the back of inventory utilisation.

Digitization benefits to continue: ZEEL is expected to post a growth of 13% YoY in domestic subscription revenues while Sun TV is likely to grow analog subscription revenues by 35% and DTH by 17.5% YoY. Dish TV's gross subscriber addition is expected to be healthy at 0.75mn while ARPU will remain at Rs166. Circulation revenue growth for print players will be healthy with Jagran and HT Media growing at 11.7% and 9.7% respectively on the back of increase in circulation and price hikes. The impact of the cut in cover price in Bihar market will be felt during the quarter for both print players.

Operating margins to compress: Margins are expected to compress by 151bps YoY for our coverage companies. Broadcasters like Sun TV and ZEEL's OPM will compress on the back of lower advertisement growth (for Sun TV) and high sports losses (for ZEEL). However, Jagran and HT Media's margins are set to expand by 102bps and 18bps respectively. Internet companies will also post margin expansion on the back of operating leverage. Hence, operating profit for our coverage universe is set to grow by 6.3% YoY and PAT by 9.9% YoY.

Recommendation & key risks: We have increased our target price for Just Dial (Hold) while downgrading Dish TV to Hold on the back of a steep rally in the stock price in the past three months. We maintain Buy rating on Jagran Prakashan, Sun TV Network and HT Media but Hold on Dish TV, ENIL, Info Edge, ZEEL and Just Dial. Key risks to our call will be 1) Delay in digitization, and 2) the TRAI (10+2) rule.

Source : Equity Bulls

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