'TV media sees stable growth led by festive; large content drives recovery in cinema'

Karan Taurani, SVP – Research Analyst (Media, Internet & Consumer Discretionary), Elara Capital, shared Q3FY22 preview of media and entertainment sector. Here are the details

1) TV:  TV segment, which was the first traditional medium to grow YoY last year (Q3FY21) beyond pre-COVID levels backed by festive, is expected to continue its growth trajectory; ad spends for SUNTV/Z/TVT are slated to grow 12% /9%/8% YoY. We expect profitability to be muted for SUN TV due to higher content cost; profitability for other genres too will remain in a narrow band due to headwinds from digital initiatives. News genre is expected to generate major traction with the viewership spike on pandemic. The merger of Zee with Sony will help consolidation in the broadcaster market; it will also enhance its probability for bidding for more sports properties in order to scale up the OTT offerings, which is largely driven by sports.

2) Exhibitors: Multiplexes are expected to outperform vs all earlier quarters in the post pandemic era and generate positive EBITDA. With the launch of Sooryavanshi / Spider Man / Pushpa, the average occupancy has revived sharply in this quarter (Q3FY21) towards almost 60% of pre-pandemic levels; large content was expected to drive recovery towards pre COVID levels in Q4FY22, however restrictions around the third wave will negatively impact recovery process which may be delayed by 3-6 months. Other metrics like SPH and ATP have largely come back to pre COVID levels and have also seen growth for selective content and markets. The footfall in comparison to Q3 FY 20 has substantial growth with opening of multiplex and single screen in most of the markets, as this is expected to be the best quarter for exhibitors since the outbreak of COVID. Ad. Revenue will be the last one to recover due to high exposure towards local advertising. We estimate an EBITDA margin of 26.3% (Q3 FY 22) PVR and 23.8% (Q3 FY22) for Inox, which is still much lower (~500-700bps) as compared to peak in pre COVID times.

Further with a caution of note with resurgence of COVID case and reinforcement of restriction across states, could make Q4 another quarter with tepid growth.

3) Radio: This medium is estimated to report slowest growth vs other forms of traditional media, as we expect recovery back to pre-COVID levels for this medium to be slightly elongated. The viewership is more skewed to specific population channels and with WFH (Work from Home) we estimate viewers to have shifted to wider horizons; COVID has accelerated shift towards digital, which has further negatively impacted consumption patterns for this medium. We expect ENIL/MBL to report ad. revenue growth of 4.3%/18% YoY (35.2%/31.1% lower as compared to Q3FY20 – pre pandemic levels); in terms of ENIL, non-radio segment remains to be muted as revenue recovery remains to be at mere 65% (vs pre pandemic levels). ENIL/MBL are estimated to report a better EBITDA margin QoQ as it will grow 1062bps/565bps, however, margins remain to be much lower as compared to pre COVID levels due to lower revenue.