TV Today Network Ltd.

Transcription

1 Analyst Archana Gude August 216

2 CMP (Rs) Target Price (Rs) Potential Upside Sensex Nifty Key Stock data BSE Code NSE Code Bloomberg Shares o/s, Cr (FV 1) Market Cap (Rs Cr) 1 Year Avg Volume 52 week H/L Shareholding Pattern (%) Promoter FII DII Others 1 Year price performance Aug-15 Analyst Oct-15 Nov-15 Dec Jan-16 TV Today Feb-16 Archana Gude archana.gude@religare.com % 27,92 8, TVTODAY TVTN:IN 5.9 1, ,786 35/181 Mar-16 Jun -16 Apr Ni y May Jul-16 Aug-16 (TVTODAY) is a part of India Today group and operates a network of TV News channels. It was incorporated in 1999 as a subsidiary of Living, the holding company of the India Today group of publications. The company is one of the leading news broadcasters with four news channels - Aaj Tak, India Today, Dilli Aaj Tak and Tez. Aaj Tak, the flagship channel of TV Today Network, has been able to maintain its dominant position in Hindi news genre, while India today has consistently increased its market share in English news genre. We expect the company to benefit from ongoing digitisation, driving higher subscription revenue as TVTODAY s all 4 channels are on paid subscription. Growth in advertising spend will be another revenue driver for the company. Recommend BUY. Strong growth in advertising revenue to aid top line industry is thriving on robust ad spends in traditional FMCG, Auto and Consumer Durable sectors. E-commerce, in addition to original ad pie, has emerged strongly and has spent around Rs 75Crs to Rs 1,Crs in CY15. Ad industry is estimated to grow at CAGR of ~15% over CY15-19E to reach Rs 81,6Crs. TV industry, with its widest reach and dominant position, will have lion's share of ~ 37%. TVTODAY has strong presence in news channel genre with Aaj Tak and India Today in its bouquet. We believe growth in advertising revenue will continue to benefit the company. Digitisation-Another growth lever in making Cable digitisation process is in the final phase of completion and we expect broadcasting industry to reap the benefits from H2FY17E onwards. TV Today's all 4 channels are paid channels. Post digitisation, increase in paid subscribers will drive higher subscription revenue for the company. Also, reduction in carriage cost by ~ 3% will boost operating margins. Exit from radio business to aid margin expansion TVTODAY operated 7 radio channels under brand Oye! 14.8 FM. Since the radio business was loss making and was weighing on operational efficiency of the group, the company sold off all 7 radio channels to ENIL for cash consideration of Rs 4.8Crs. The company's 4 radio channels in Amritsar, Shimla, Jodhpur and Patiala are taken over by ENIL. Remaining 3 channels will be transferred post clearance from Ministry of Information and Broadcasting. Hiving off of loss making radio business is a right move taken by the management and we expect margins to improve over FY17-18E. Outlook and valuation We expect TV Today to drive on digitisation wave and report healthy revenue growth led by increase in advertising revenue and incremental subscription revenue. Exit from radio business will aid margin expansion. Strong balance sheet, leadership position in news genre and healthy revenue growth gives added advantage over its peers. We expect revenue, EBITDA and net profit to grow at a CAGR of 14.8%, 16.1% and 16.8% over FY16-18E. Recommend BUY on the stock with a price target of Rs 388. Particulars, Rs Cr FY14 FY15 FY16 FY17E FY18E Net sales YoY Growth (%) EBITDA EBITDAM (%) PAT PATM (%) eps (Rs) PE (x) RoE (%) 39.5% % % % % Source : Company & RSL Research

3 Financial Analysis (FY16) Revenue EBIT (Rs Cr) 6 5 (Rs Cr) Broadcasting contributed 98% of total sales in FY Broadcasting 9. Radio -2-4 Broadcasting Radio Business profile Hindi News channels Aaj Tak leads in Hindi news genre with No 1 position Regional News Channel English News Channels India Today stands at No 3 in English news genre

4 Investment Rationale TV industry growth to benefit TV Today Network As per FICCI KPMG media report, TV industry is expected to grow at a CAGR of 15.6% over CY15-19E to reach Rs 97,5Cr. This growth will be driven by robust growth in ad spends by FMCG, Auto, Consumer Durables, etc. Also, digitisation process, which is expected to complete in CY16, will drive substantial growth in subscription revenue. Increase in channel carrying capacity of MSOs to ~1, due to digital platform system will benefit broadcasters in terms of higher subscription revenue and lower carriage cost. TV Industry Size Revival in advertising spends and cable digitisation to aid TV industry (Rs Cr) (%) 12,, 8, 6, 13.4% 14.5% 12.7% 13.9% 12.5% 18.% 16.% 16.% 17.1% 14.% 15.7% 14.% 12.% 1.% 4, 8.% 6.% 2, - 32,9 CY11 37, 41,7 47,5 54,4 63, 73,9 85,5 97,5 CY12 CY13 CY14 CY15 CY16E CY17E CY18E CY19E 4.% 2.%.% Total TV Industry Size YoY Growth (%) Source: FICCI & KPMG report Healthy growth in subscription and advertising revenue to hold the show Earlier, traditional subscription industry grew by ~1%. This was primarily on account of subscription revenue loss in the value chain from subscribers to broadcasters. Post digitisation regime, we expect transparency in the revenue flow and increase in revenue sharing with broadcasters. Advertising revenue, after taking a pause in CY14, has rebounded smartly in CY15. This growth trajectory is expected to continue and the industry is expected to touch Rs 29,9Crs by CY19E. Subscription & Advertising revenue growth Healthy growth in advertising and subscription revenue to benefit broadcasters (Rs Cr) (%) 8, , , , , , , 4. 1, ,6 21,3 12,5 24,5 13,6 28, 15,5 32, 17,5 36,9 19,8 43,3 22,6 51,3 26, 59,5 29,9 67,6 CY11 CY12 CY13 CY14 CY15 CY16E CY17E CY18E CY19E Subscrip on revenue Adver sing revenue Subscrip on yoy Growth (%) Adver sing yoy Growth (%) Source: FICCI & KPMG report

5 Increase in paid C&S subscribers to prop up subscription revenue Before digitisation was made mandatory, subscribers were more skewed towards analog platform. However, to monitor subscription revenue value chain and to curb major revenue loss to broadcasters, the Government announced the cable Television Network (Regulation) Amendment Bill, 211. In 213, the country had 16.1Cr TV households of which 8% were connected by cable network. In 219, total TV household is estimated to be at 19.6cr and penetration of cable TV is expected to increase to 9%. We believe increase in digital subscriber base will drive healthy subscription revenue growth for broadcasters. TV Industry and C&S penetration (In Cr) (%) 25 92% 9% 9% % % 15 84% 1 5 8% 82% E 82% 8% 78% 76% 74% TV Households Paid C&S penetra on of TV Source: FICCI & KPMG report TV Today s channels are outperforming peers in their respective category TV Today's Hindi news channel, Aaj Tak, is the undisputed leader of Hindi news genre. The channel has maintained its numero uno position for several consecutive years in terms of viewership. India today, on other hand, is showing steady growth. The channel stands at No 3, climbed a rank above and the gap between No 2 has narrowed. The company's other two channels Dilli Aaj Tak and Tez are also doing well. TV Today's all 4 channels are on paid subscription platform and we believe increase in cable penetration and lower carriage fees will benefit the company. Aaj Tak - No 1 in Hindi News genre India Today - Stands at No 3 TV Today to reap benefits of being market leader in the news genres it operates (In s), 9, 8, 7, 6, 5, 4, 3, 2, 1, - 92,984 85,921 66,641 59,199 54,214 Aaj Tak India TV India News ABP News Zee News (In s) Times Now NDTV 24X7 India Today CNN News 18 BBC World News Weekly Impressions (s) Weekly Impressions (s) Source: All India (U+R) : NCCS AB : Males 22+ Individuals, To get this data on your Twitter timeline, tweet with #BarcTweet Top 5 English News Channels

6 Exit from radio business: Strategic move to improve profitability TV Today owned 7 radio stations in Mumbai, Delhi, Kolkata, Amritsar, Patiala, Shimla and Jodhpur. The company sold 4 radio stations (Amritsar, Patiala, Shimla and Jodhpur) to ENIL for Rs 4crs. Rest 3 radio stations will be sold to ENIL post MIB clearance. We believe this strategic move to exit from radio business will benefit the company as it will improve profitability. Radio business financials Particulars, Rs Cr FY12 FY13 FY14 FY15 FY16 Revenue EBIT Source: Company, RSL Research

7 Financial Analysis Net sales & YoY growth (Rs Cr) (%) 8 3.% Net sales, EBITDA, PAT to grow at a CAGR of 14.8%, 16.1% and 16.8% over FY16-18E respectively % 24.6% 22.4% 2.% 15.4% 15.% 14.6% 14.2% 1.% FY14 FY15 FY16 FY17E FY18E 5.%.% Net sales YoY Growth (%) EBITDA & EBITDAM Source: Company, RSL Research (Rs Cr) (%) EBITDA and PAT margin to improve led by operational efficiency FY14 FY15 FY16 FY17E FY18E EBITDA EBITDAM (%) PAT & PATM Source: Company, RSL Research (Rs Cr) (%) FY14 FY15 FY16 FY17E FY18E PAT PATM (%) Source: Company, RSL Research

8 Financial Analysis RoE & RoCE (%) FY14 FY15 FY16 FY17E FY18E RoE (%) RoCE (%) Cash Flow (Rs Cr) 15 Source: Company, RSL Research 5-5 FY14 FY15 FY16 FY17E FY18E - Cash flow from opera ng ac vi es Cash flow from financing ac vi es Cash flow from inves ng ac vi es Source: Company, RSL Research

9 Company background Incorporated in 1999, TV Today Network is a leading news broadcaster in India. The company is a part of renowned India Today Group. TV Today operates 4 news channels Aaj Tak (Hindi), India Today (English), Dilli Aaj Tak (Hindi) and Tez (Hindi). Earlier, the company operated 7 radio stations under the brand Oye! 14.8FM which it sold to ENIL. Key Management Personnel Name Aroon Purie Anil Vig Ashok Kapur Koel Purie Rinchet Puneet Jain Devajyoti Bhattacharya Sudhir Mehra Kalli Purie Bhandal Rajeev Gupta Designation Chairman & Managing Director Director Director Non Executive Director Company Secretary Director Independent Director Non Executive Director Independent Director Key Risks Slowdown in economy will lead to lower advertising revenue TV industry is heavily dependent on advertising spends as it contributes ~3% of sales of broadcasting industry. Slowdown in economy will force major industries like FMCG, Auto, Consumer Durables to cut the ad spends. This will impact earnings of broadcasters. Intense competition in news genre may result in loss of leadership TV Today s operates all 4 channels in news category. Aaj Tak is leader in Hindi news genre while India Today is at No 3. With entry of new news channels, these channels may face stiff competition to retain their rankings. Further delay in digitisation will result in loss of subscription revenue The Government has declared December 31, 216 as last date for digitisation. The progress has already taken longer than the estimated time. Any further delay will weigh on subscription revenue growth assumption.

10 P&L Account - Consolidated Particulars, Rs Cr FY14 FY15 FY16 FY17E FY18E Net sales Expenditure Raw material consumed Other raw material cost..... Employee cost Other expenses Total expenditure EBITDA Other income Depreciation PBIT Interest expenses PBT Tax PAT Source : Company & RSL Research Balance sheet - Consolidated Particulars, Rs Cr FY14 FY15 FY16 FY17E FY18E Share Capital Reserves & Surplus Total Shareholder's Fund Long term borrowings..... Other non current liabilities Trade payables Short term Borrowings Other current liabilities Total liabilities Net Block Other non current assets Deferred tax assets Sundry Debtors Cash & Cash equivalents Other current assets Total assets Source : Company & RSL Research

11 Cash Flow - Consolidated Particulars, Rs Cr FY14 FY15 FY16 FY17E FY18E Net profit before tax Total adjustments Operating profit before working capital changes Cash flow from operations Net cash used in investing activity Net cash used in financing activity Net Inc/(Dec) in Cash & Cash Equivalents Cash & Cash Equivalents at the beginning of the year Cash & Cash Equivalents at the end of the year Source : Company & RSL Research Key Financial ratios Particulars FY14 FY15 FY16 FY17E FY18E Profitability Ratios Gross Profit/ Net sales (%) EBITDA / Net Sales (%) NPM / Total income (%) ROE (%) ROCE (%) Turnover Days Debtors Velocity Creditors Velocity Gross Asset Ratio Liquidity Ratios Gross Debt-Equity Ratio..... Interest Coverage Current Ratio (x) Payout ratios Payout (%) Dividend (%) Yield (%) Source : Company & RSL Research

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