"TV was the first traditional medium to report higher advertising revenue vs pre COVID levels last year (grew 7%-8% vs pre COVID levels)," said Karan Taurani, Senior Vice President - Research Analyst (Media, Consumer Discretionary & Internet)Elara Capital. Taurani shared his predictions for the M&E sector, noting that Q3FY23 has been relatively muted with revenues declining 5%-6%YoY vs pre COVID levels, despite positive impact of festive, primarily due to 1) lower spends by new age/e-commerce companies (cut ad. budgets by 30%-40%YoY) and 2) muted growth in FMCG vertical due to RM inflationary pressures YoY. Here are the rest of his predictions.
Expect ad revenue growth of 8.5%/ 9%/12.4% for Zee/Sun/TV today QoQ respectively led by festive season but a decline of 12.8%/1%/8% YoY due to higher base (TV medium surpassed pre-COVID levels last year). Expect subscription revenue to remain flat for Zee and a growth of 6% QoQ for Sun; this is primarily on the back of uncertainty of NTO implementation; we expect subscription revenue to grow 8%-10% over the near term helped by price hikes, as NTO 3.0 will be implemented by Feb’23.
For SUNTV, the absence of IPL and other operating revenue (movie segment revenue - no major releases this quarter) will lead to total revenue of Rs 8,563mn – decline of 17.1% YoY and up 5.1% vs pre Covid levels of FY20. Z is expected to report flat revenue growth YoY, but up 4%/3%, QoQ/ pre covid, whereas TVT’s revenue is expected to decline of 4% YoY, due to high base in Q3FY22, although up 17%/11.5%, QoQ/pre covid respectively, driven by festive quarter.
Expect EBITDA margin to grow 80bps/down 90bps/ up 350bps QoQ, helped by higher ad spends; however, margins are estimated to decline 722bps/487bps/1720 bps YoY for Z/SUNTV/TVT respectively, due to 1) pressure on content costs (TV and digital) and 2) lower ad. spends. Expect PAT to decline 53%/ 8%/ 51% YoY and grow 25%/5%/ 54% sequentially (decline 59%/up 13%/down 19% vs pre Covid levels) for Z/SUNTV/TVT respectively.
Exhibitors - Better performance QoQ on a low base; remains lower vs pre COVID
Exhibitors are expected to perform better sequentially led by strong performance of movies like Avatar-The way of water, Drishyam 2, Kantara & Vikram Vedha, while other big budget movies like Cirkus, Ram Setu, Thank God, Bhediya have performed much below expectations. The festive season led to healthy performance in Q3FY23 sequentially, however growth was subdued when compared to Q1FY23.
Box Office revenue is expected to post an 85% recovery to pre-covid level in Q3FY23. Expect PVR & INOL box office revenues to grow 18% each sequentially but decline 15% each vs pre Covid levels (Q3FY20), 1) multiple large budget Hindi films report a below par performance and 2) small/medium budget films continue to struggle. Expect other metrics like ATP to grow 19%/12% vs pre-covid (growth of 12%/6.5% QoQ) for PVR/INOL helped premium content like Avatar, while Footfalls for PVR/Inox are expected to decline 34%/27% when compared to pre-covid levels as Hindi content fails to perform on a consistent basis. SPH is expected to grow in the range of 2-3% sequentially for both PVRL & INOL helped by premium content (Avatar). Ad revenue recovery to be delayed in line with expectation and may only come back to pre-covid levels in FY24; expect ad revenue to recover towards 60% vs pre pandemic in Q3, despite festive season, primarily due to 1) muted performance of Hindi content which drives a large portion of ad.spends and 2) challenged macro environment, wherein ad. spends across verticals are under pressure. We estimate an EBITDA margin of 30%/32% for PVRL/INOL (incl INDAS), which is 360bps/90bps lower vs pre COVID levels; metrics like ATP/SPH have been able to offset some negative impact of lower footfalls and helped support profitability.
Radio - Still struggling to reach pre pandemic levels
Radio medium has been growing slowly compared to other forms of media while there has been a substantial shift of consumers towards digital. Expect ENIL/MBL to report revenue growth/decline of 14%/7% YoY (down of 40%/20.4% vs Q3FY20 – pre pandemic levels) respectively; in terms of ENIL, expect non-radio segment to recover at around 83% (vs pre pandemic levels), helped by normalisation of events/activations/concerts; Believe ENIL’s non radio business will continue to report traction over near term. Expect ENIL/MBL to report an EBITDA Margin of 20.6%/12% in Q3FY23.
