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Ad spends outlook challenging in near term!

About the stock: TV Today Network (TV Today) is a leading news company engaged in broadcasting operations. Part of the India Today Group, the company operates mainly in three segments—digital, television and radio broadcasting.

* It has consistently maintained its leadership in the Hindi new segment across the last two decades

Q2FY23 Results: TV Today’s performance was impacted by weak ad spends and lower ad inventory resulting in topline and bottomline decline.

* Topline came in at | 211.6 crore, down 6.4% with TV and other media (clubbed segment of broadcasting and digital) revenues at | 209 crore (down 6.1% YoY). While TV broadcasting revenues would have declined sharply YoY due to weak ad spends by advertisers as well as lower ad inventory; digital segment would have grown, as per our understanding

* EBITDA at | 26.5 crore, was down 55.4% YoY with margins at 12.5%, down ~14 percentage points YoY, impacted by negative operating leverage

* Reported PAT at | 19.7 crore was down 58% YoY with weak operating performance dragging the bottomline

What should investors do? TV Today’s share price has underperformed with the stock price declining ~30% over the past five years.

* We downgrade from BUY to HOLD as ad spends outlook remains challenging in the near term. Soft ad momentum will also translate into margin softness, in our view

Target Price and Valuation: We value TV Today at | 290 i.e. 10x FY24E P/E

Key triggers for future price performance:

* Viewership trend over the medium term as this will drive ad revenue growth trajectory

* Digital segment expansion with new properties/inorganic acquisition

Alternate Stock Idea: Besides TV Today, we like Inox Leisure in the media space.

* A play on strong content and consolidation

* BUY with a target price of | 675

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