TV Today Network price target is Rs111 by Angel Broking
By Anand Shah, Chitrangda Kapur (Angel Broking)
Performance Highlights
- Weak traction in advertising revenue drags Top-line: For 2QFY2010, TV Today posted de-growth of 3.5% yoy in its Top-line to Rs64.5cr (Rs66.9cr); this includes subscription revenues of Rs4.5cr during the quarter. The economic slowdown is reflected in the slowdown in the ad-inventory utilisation, which has gone down significantly for all media companies. There is also a trend of decline in viewership across all Hindi News channels; despite this, Aaj Tak, the company’s flagship channel, continues to maintain its leadership position in the Hindi News genre, with an 18% market share during the quarter. Tez registered a market share of 4% during the quarter, while Headlines Today has been gradually inching up, registering average viewership share of 12% in the English News Genre.
- Multifold increase in Other Income drives a strong Bottom-line: In line with our expectations, TV Today continued its performance in 1QFY2010 and posted a robust Bottom-line growth of 39.6% to Rs10.6cr (Rs7.6cr), aided by Margin expansion of 140bp and a multifold increase in Other Income (up 107.1% yoy to Rs7.9cr), on account of gains from maturity of FMPs (to the tune of Rs4cr).
- Sharp drop in overheads aids Margin expansion: TV Today posted a Margin expansion of 140bp yoy to 19.6% (18.2%), aided largely by a sharp fall of 740bp in other expenses to Rs8.8cr (Rs14.1cr) and a 270bp fall in advertising and distribution cost (decline in carriage fees) to Rs15.2cr (Rs17.6cr). However, a significant rise in employee cost, up 776bp to Rs21.4cr (Rs16.9cr), kept a check on Margin expansion.
Outlook and Valuation
After the 2QFY2010 results, we have marginally tweaked our FY2010E Earnings estimates to account for - 1) lower advertising expenses (reduction in carriage fees) and 2) Higher Other Income. We estimate TVTN to post CAGR of 13.8% in its Top-line over FY2009-11E. Advertising Revenue is expected to post CAGR of 13% over FY2009-11E to Rs305cr. We estimate Subscription Revenues to contribute a mere 6% to the Top-line in FY2011E. We have factored in overall Subscription Revenue (domestic and international) of Rs14.9cr and Rs18.7cr for FY2010E and FY2011E, respectively. On the Operating front, we expect Margins to improve by 560bp to 23.2% during FY2009-11E, driven by a low base, lower carriage fees (reflected in this quarter), higher operating leverage and savings in rental costs to the tune of Rs8-10cr (owing to the shifting of office premises to Noida in FY2011E). Despite higher Depreciation (estimated capex of Rs70cr in FY2010-11E, including shifting to the new office complex over the mentioned period), we expect Earnings to post a modest CAGR of 27.4% over FY2009-11E.
While improved traction in terms of viewership of its channels and higher subscription revenues remain the key growth drivers for the company, uncertainty in Ad-revenues and the heavy dependence on a single channel (85% revenues from Aaj-Tak) remain causes of concern. However, At the CMP of Rs93, TVTN is trading at valuations of 9.9x its FY2011E EPS of Rs9.4, which is attractive, given its strong 27% Earnings CAGR (upside risk – if advertising revenues revive in 2HFY2010) and a surplus cash balance of Rs140cr+. Hence, we maintain a Buy, with a Target Price of Rs111.
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Indian stock market daily morning report (March 12, 2010, Friday)
Recovery in IT and bank stocks helped the Sensex close positive yesterday. Profit taking was witnessed in auto stocks which capped the gains. Market breadth was weak near about 0.6x. Asian markets are mixed today. While the Nikkei is up, the Hang Seng is trading with a moderate decline.
Indian stock market and companies daily report (March 12, 2010, Friday)
The benchmarks spurted to their highest level in a month and a half, as European stocks and US index futures moved off their early lows. Banking and IT stocks rose, while auto stocks fell. The market was volatile. The Sensex recovered from the lower level in morning trade, after hitting a fresh intraday low. The intraday recovery gathered steam, with the Sensex surging to the day's high. The market pared gains after hitting fresh intraday high in early afternoon trade. The Sensex surged at the end of trade, as European stocks recovered from early lows. The Sensex and the Nifty closed in the green, with gains of 0.4% and 0.3%, respectively. The BSE Mid-cap and Small-cap indices underperformed the benchmark indices and closed with losses of 0.2% and 0.5%, respectively. Among the front-liners, Sun Pharma, Sterlite, Bharti Airtel, Wipro and ICICI Bank were up by 1-3%, while HUL, Hindalco, RCOM, ACC and Tata Power were down by 1-4%. In the mid-cap segment, Core Projects & Technologies, AIA Engineering, Fortis Health, CRISIL and Gammon Infra were up by 4-6%, while Shree Renuka Sugars, National Fertilizers, Indusind Bank, EID Parry, and REI Six Ten were down by 4-6%.
Indian stock market daily closing report (March 12, 2010)
Markets remained range bound throughout the day and ended flat. Sensex heavyweight Hindustan Unilever lost 4.02% . The Sensex closed at 17,167 down 1 points making high of 17,245 and low of 17,127 and Nifty shut at 5,137 up 4 points making high of 5,158 and low of 5,122. However Nifty March future ended at 11.1 points premium. The breadth remained week and the markets reported low total turnover of Rs 81,256 cr. Among the Realty, Hdil was down 1.35%, Dlf was down .83% and Unitech was down by .27%. In Banking stocks, HDFC Bank down 1.48%, ICICI Bank up .59%, , SBI Bank up .1% and Kotak Bank down by .25%.
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