Media - Q4FY14 Results Preview - Most segments set to soar

We expect Q4FY14 results to be healthy for media companies with strong double digit ad growth. Print players are expected to deliver better results compared to broadcasters. Subscription revenue benefits will continue for Sun TV while ZEEL is expected to grow at low single digits on the back of a high base. Circulation revenues for print will continue to grow in mid teens while Dish TV subscriber addition will continue to remain modest. Margins for internet companies will continue to expand on the back of high operating leverage.

- Double digit ad growth for industry: Advertisement growth for the industry will remain strong during the quarter both for print firms and broadcasters. Print companies will benefit from elections with Jagran and DB Corp both expected to post ~15% ad growth and HT Media 20%+ ad growth for its Hindi publication but mere 4% for English. Sun TV will get impacted by the TRAI rule and hence we have modelled merely 1% growth, while ZEEL could post 22% ad growth. ENIL may report an 8% YoY ad growth on the back of high base.

- Healthy circulation revenue growth for print players: Circulation revenue growth for print players will be healthy with DB Corp and HT Media each growing at ~16% and Jagran by 13% on the back of increase in circulation and price hikes. The impact of the cuts in cover price in Bihar market will be felt during the quarter for both HT Media and Jagran. On the back of high base, ZEEL is expected to post low single digit growth in domestic subscription revenues while Sun TV is likely to grow analog subscription revenues by 47% and DTH by 22% YoY. Dish TV's gross subscriber addition is expected to remain modest at 0.45mn while ARPU will decline sequentially to Rs164 following lower number of days in the quarter.

- Operating margins to expand: Margins are expected to expand by 64bps YoY for our coverage companies. Broadcasters like Sun TV and ZEEL's OPM will expand due to operating leverage. However, DB Corp and HT Media's margins are set to decline by 91bps and 31bps respectively due to high RM cost and the full impact of Bihar launch for DB Corp. Internet companies will also post margin expansion on the back of strong operating leverage. Hence, operating profit for our coverage universe is set to grow by 14.4% YoY and PAT by 16.5% YoY.

- Recommendation & key risks: We continue to prefer Jagran Prakashan among print companies and recommend a switch to Sun TV from ZEEL. Among internet companies we recommend a switch from Just Dial to Info Edge. We maintain Buy rating on Jagran Prakashan, DB Corp, Sun TV Network and HT Media, Info Edge, Dish TV but Hold on ENIL & ZEEL while maintaining Sell on Just Dial. Key risks to our call will be 1) Low election led ad spends, and 2) aggressive regulations.

Source : Equity Bulls

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