Edelweiss Securities has come out with its report on Media universe. The research firm expects Q1FY15 revenue of media universe to grow 11.2% YoY, though EBITDA and PAT are likely to decline by 2.3% and 23% YoY respectively, says the report.
We expect Q1FY15 revenue of our media universe to grow 11.2% YoY (18% YoY in Q4FY14), though EBITDA and PAT are likely to decline by 2.3% and 23% YoY (10% YoY growth and a decline of 12.6% YoY in Q4FY14) respectively, impacted by lower activation revenues for MSOs and higher investments. The TV industry's ad revenue grew ~10-11% during the quarter. While net realisation in Phase 1 cities remains largely unchanged QoQ, some improvement was seen in Phase 2 cities. Pick-up in seeding of boxes in Phase 3 and 4 cities has been rather slow. We remain positive on digitisation over the long term, though near-term performance of the MSOs is likely to remain volatile.
Key highlights of the sector during the quarter
ZEE launched the Zindagi channel on June 23, 2014. Success of the channel is imperative if the company has to gain share in the GEC genre. Innovations like Zing are helping Dish TV garner gross subscriber additions in Phase 3 and 4 areas. The company likely managed to sustain its incremental market share at 23-24% levels in Q1FY15. Election-related spending failed to have much positive impact on ad growth of the print companies. Box office performance was good in April, though May was disappointing. Collections improved MoM in June, but box-office revenue is likely to dip YoY on high base. Overall, like-to-like footfalls could be slightly lower YoY in Q1FY15.
Result expectations for the sector and stocks under coverage
While we expect ZEE's ad revenue to grow 15% YoY in Q1FY15, domestic subscription growth will be comparatively subdued at 4% YoY. EBITDA margin is likely to be under pressure due to Zindagi launch related costs. Sun TV's ad revenue is expected to grow 5% YoY. Broadcast revenue is expected to suffer due to reduction in the number of minutes. We expect Sun TV to report loss of ~INR200mn in its IPL operations in Q1FY15. Aided by price hikes, we expect Dish TV's ARPU to increase to INR172-173, up from INR170 as at FY14 end. Hathway's broadband business continues to gain traction. Disintegration of MediaPro will lower DEN's revenue by ~INR160mn (minimal impact on EBITDA). PVR will be amortising ~INR100mn every year for the next nine years due to Cinemax's amalgamation, which will have minimal impact on profitability.
Outlook for the next 12 months
We expect ad growth to improve across the TV, print and radio companies in H2FY15, led by likely GDP recovery and improvement in sentiment. Although FY15 will be a muted year in terms of subscription revenue growth for ZEE due to the MediaPro split, some respite is likely to come from the TRAI mandated tariff hike. Over the next one year, as gross billing commences, we expect some improvement in net realisation in Phase 1 and particularly in Phase 2 cities. Seeding of boxes in Phase 3 and 4 areas is likely to get delayed beyond the December 31, 2014 deadline. If the 12-minute ad cap is implemented, we expect major broadcasters to be largely unaffected as they (excluding news and music genres) are already following it.
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