Bad quarter; GST impacts ad revenue growth
Reason for report: Q1FY18 results preview
We expect I-Sec media universe to register a weak quarter as adspends were postponed owing to pre-GST destocking across industries. We forecast Q1FY18 ad revenue growth of 2.0% YoY for the media companies under our coverage and expect things to limp back to normal post GST implementation. While we expect most media companies in our coverage universe to post low-to mid-single digit ad revenue growth, performance of ENIL to be the weakest as the company is enforcing its ongoing yield expansion strategy. Dish TV is expected to continue its weak performance with marginal ARPU recovery despite IPL because of Ramadan. We downgrade ENIL to SELL from Hold and Jagran Prakashan (JPL) to ADD from Buy and maintain HOLD on Dish TV with a revised target price of Rs83.
* ENIL – Ad yield improvement hiccups: Despite addition of new stations, ENIL is expected to report 2% YoY revenue decline due to weak ad revenue growth. Benefits of its yield expansion strategy are expected to be delayed, which amplified the negative impact. As part of this strategy ENIL has deliberately avoided low-yield government ads in order to maintain yields while cutting inventory. Continued marketing spend on new channels is expected to result in 41% YoY decline in EBITDA.
* Dish TV – Not out of the woods: Revenues are expected to decline 6.5% YoY due to ~9% decline in subscription revenues owing to weak ARPU of Rs142 (+6%/-14% QoQ/YoY) and low subscriber-addition of 181k (165k/402k in Q4/Q1FY17). Impact of low uptake in Ramadan offsetting the boost from IPL is believed to result in lower ARPU. Higher content costs owing to new deals and higher marketing costs are expected to drag EBITDA down 24% YoY.
* Broadcasters weak on both advertising and subscription fronts: Weak domestic ad environment, continued local issues in Bangladesh and loss of sports ad revenues are expected to result in only 3% YoY ad revenue growth for ZEEL (high single digit exsports). While subscription revenues are expected to decline 13% YoY due to loss of sports business and lack of better content deals with distributors owing to uncertainties over the new tariff order. Sun TV is estimated to report a muted 2% YoY ad revenue growth due to higher impact of GST on local advertising and prevailing drought conditions in its key markets. Subscription revenues for Sun TV are expected to post a 10% growth in Q1FY18.
* Print – Newsprint cost benefits to be seen in later quarters: Hindi print players DB Corp (DBCL) and JPL are expected report 4% YoY print ad revenue growth. HT Media’s (HTML) English print ad revenues are estimated to decline 5% YoY while ad revenues for its Hindi print business housed under HMVL is expected grow 3% YoY. Benefits of INR appreciation and lower newsprint costs will not be felt immediately because of inventory utilisation. Radio business of DBCL and HTML are expected to report 15% and 25% revenue growth respectively owing to new stations.
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