Buy TV18 India for target of Rs 102 - Elara Capital

• Rating : Buy
• Target Price : INR102
• Upside : 32%
• CMP : INR77 (as on 28 May 2010)

Tour de force

Topline growth returns with a bang

TV18 posted an extremely strong fourth quarter result for FY10, with news operations registering a topline growth of 25% on a QoQ basis and 20% on a YoY basis. We had earlier indicated in our recent report on the company that the management had taken stringent cost control measures post heavy losses in FY09, and was waiting for the topline growth to return to show profitability. The Q4FY10 results have confirmed exactly that with an operating expense growth of just 7% on QoQ basis, resulting in news operations becoming PAT positive for the first time in FY10 reporting INR240mn as net income.

Infomedia18 surprises with 79% YoY topline growth

Infomedia18 posted a bumper growth of 79% on a YoY basis and 128% on a QoQ basis. The strong growth, further helped by negative minority interest, pushed the company to become PAT positive during the quarter with INR96mn in net income for Q4GY10. The recent restructuring exercise in the company, post TV18's acquisition, has helped the company trim its net losses to just INR35mn in FY10 from INR933mn in FY09.

Valuation

TV18's stock has suffered massively during the past one year due to mounting losses and struggling topline growth across the group companies. However, Q4FY10 marks the second quarter of topline growth with an accelerated bottom-line growth, a trend we believe would continue going forward. We see the stock reacting positively going forward as the market finds it tough to ignore the strong revival underway in the company. We reiterate our Buy recommendation on the stock with a target price of INR102, based on SOTP method. We believe that the CMP of INR77 provides a very good entry point into a superior growth story that is unfolding in TV18.

Source : Equity Bulls

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