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The much awaited pick-up in ad-revenue growth for broadcasters might remain elusive even in 2QFY24, in our view. A still fledgling rural recovery, delayed start to festive season and some diversion of FMCG’s ad-budget towards sports (here) likely impacted TV (GEC) adspend during 2Q. Subscription revenue growth (YoY), on the other hand, should sustain as customer churn, if any, post recent price hikes would have stabilised now, in our view. Besides, a record box office performance of movies should benefit, apart from PVR-INOX, ZEEL and SUNTV as well. Zee Studios’ “Gadar 2” and Sun Pictures’ “Jailer” will help ZEEL/SUNTV report 11%/47% YoY revenue growth. A slew of blockbuster movies across languages mean PVR-INOX will likely report all time high revenues (INR 18.4bn; JMFe). Operating leverage in the business means its EBITDA (pre Ind-AS) could jump five-fold QoQ to INR 3.8bn. We expect Nazara to report a modest 14% growth YoY with some sequential moderation in EBITDA margins. Nazara’s capital allocation plans post recent fund raises and way-forward for RMG business will be key monitorables. In spite of a strong run-up (+50% in past six months), we continue to find value in SUNTV. We expect ZEEL to pause till newco listing (which we expect by year-end), but remain constructive over the medium term. We believe market’s apprehension on PVR-INOX’s sustained recovery offers a good entry point at current levels. We remain cautious on Nazara on rich valuations.

* Zee Entertainment: We expect ZEEL to report 11% YoY growth in 2Q net of -2%/+11% growth in ad/subscription revenues. Muted ad-growth despite a likely uptick in FMCG’s A&P spend this quarter points to some diversion of FMCG’s ad-spend towards sports. A lower ad-rate in cricket due to weaker demand from start-ups has likely made the ad ROIs in cricket more palatable for FMCG companies, in our view. This could however be transitory. Moreover, strong other sales and services led by INR 6bn+ BOC of Gadar 2, a Zee Studios movie, will likely offset soft ad-revenues. Low budget (INR 600mn; Source: Media) of Gadar 2 means flow through to margins will be healthy. We expect c.200bps margin expansion QoQ. Key things to watch: a) progress on on-going merger and tentative timelines; b) update on promoter’s case in SAT.

* Sun TV: Jailer’s, a Sun Pictures movie, strong BOC (INR 6.5bn+) and c.INR 1bn OTT rights sale to Netflix should translate into c.INR 3.7bn revenue for Sun’s movie distribution business. We see trends in ad/sub growth to remain broadly similar to 1Q. We are building 2%/6.5% YoY revenue growth for ad/sub revenue. We expect consol revenue growth of c.47% YoY. Reported EBITDA margin is expected at c.72%, as Sun TV amortises movie production cost (below EBITDA). Adjusted for Jailer’s production cost (c.INR 2.2bn) however, EBITDA margin could decline 262 bps sequentially to 57.1%. Any decision on cash utilisation (special dividend; acquisitions) will be key to watch.

* PVR-Inox: India’s box office collection in 2QFY24 is estimated to be c.INR 34bn (Exhibit 2). Strong performance from Hollywood (Barbie, Oppenheimer) and Bollywood movies (Gadar 2, OMG 2, Jawan) mean PVR-INOX’s share will likely be higher. We est. PVR-INOX to report INR 10.6bn (+53% QoQ) of ticket sales (c.31% share of BOC). A strong admits growth (46mn; +55% YoY pro-forma) and uptick in SPH (+12.5% YoY) should drive 75% YoY growth in F&B revenues (pro-forma). We expect consolidated revenues to be INR 18.7b – highest ever. Operating leverage should drive 14ppt sequential improvement in EBITDA margin to 20.4% (pre Ind-AS).

* Nazara Technology: We estimate Nazara to report 14.4% YoY revenue growth in 2QFY23. A still favourable base in Gamified Early Learning (only one month of Wildworks in 2QFY23) will aid 33% YoY growth. Delayed festive season could mean the usual pickup in eSports – due to accessory business – may be absent. We expect 22% YoY growth in this segment. RMG and Datawrkz will continue to drag. We expect EBITDA margin to improve by 182bps YoY to 9.9%. Key things to watch: a) RMG strategy after changes to GST; b) outlook on eSports and its media revenues after lifting of ban on BGMI; c) capital allocation strategy with recent fund raises; d) FY24 revenue/margin guidance. 

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