SECTOR: MEDIA
TV Today Network
STOCK INFO.
BLOOMBERG
BSE Sensex:20957.81
S&P CNX: 6241.10
TVTN@IN
REUTERS CODE
6 December 2013
Initiating Coverage
(Rs CRORES)
Buy
Rs118
TVTO.BO
Y/E MARCH
FY13
FY14E
FY15E
We recommend to BUY TV Today Network with one year price
target of
Rs
175 at 15xFY14E earnings.
TV Today Network runs four news channels namely AajTak,Headlines
Today,Tez and Dilli AajTak.
Digitisation, a windfall gains for broadcasters:
Broadcasters are
likely to enjoy windfall gains as digital cable opens up the under declared
pay-TV revenues. Digitisation will also ensure increase in cable
capacity, which will lead to reduction in carriage cost paid by
broadcasters to erstwhile analog cable oparators. The power of
bargaining will shift from distribution networks to content. In such a
scenario, we believe broadcasting networks will grow their profit at
CAGR of 35-40% during FY13-FY17 just because of increase in
subscription revenue, which will flow entirely to bottom line. Please
look at Table 1 and Table 2 for schedule of digitization and growth in
subscription revenue.
News Content's double whammy:
News channels suffer double
whammy as they need to pay high carriage fee on top of low
subscription income as compared to General Entertainment Channels
(GECs) to get their channels carried on analog networks. Carriage
fee is the single largest cost item in P&L of news channels at ~30-
35% of revenues. This has lead to financial bleeding of almost all
news channels. Two of the three listed players are barely profitable
and one is loss making for a long period of time. Digitisation will
reduce the carriage fee, which will ensure better financial performance
from news broadcasters.
TV Today Network, a turnaround:
Surge in revenues with not
much increase in associated cost will ensure a huge turnaround in
operational performance of the company. The company will likely report
life high profit at the end of FY14, which will also ensure RoE of
~20%. We expect revenues to grow at CAGR of 23% during FY13-
15E vs 10% growth during FY06-13. This will lead to disproportionate
growth in PAT at CAGR of 171% during FY13-15E vs PAT CAGR of
-11% during FY06-13.
Valuations and View:TV
Today is play on turnaround of news
broadcasting business as well as general theme of digitization in media
space. The stock offers attractive risk reward at ~10x FY14E EPS
with ~4% dividend yield in FY14E. Historically, the company has traded
at median PE of 21x and lowest PE of 9x since listing in FY04.
Therefore, we believe there is a decent upside to stock in 1 year time
frame even if we take 30% discount to median valuations. Recommend
BUY with target price of Rs 175 in 12 months time (15x FY14E, 30%
discount to median valuations).
Sales
EBITDA
PAT
BV/Share (Rs.)
EPS (Rs.)
EPS growth (%)
P/E (x)
P/BV (x)
EV/EBITDA (x)
Div yld (x)
ROE (%)
313
42
12
55
2
15%
58
2.2
16.6
0.6%
4%
415
135
69
65
12
476%
10
1.8
4.5
4.2%
19%
477
164
88
74
15
27%
8
1.6
3.3
5.9%
21%
KEY FINANCIALS
Shares Outstanding (Cr.)
Market Cap. (Rs Cr.)
Market Cap. (US$ m)
Sales CAGR 3 Yrs to FY13E
PAT CAGR 3 Yrs to FY13E
5.95
702
115
12%
77%
STOCK DATA
52-W High/Low Range (Rs)
Major Shareholders (as of Dec 2010)
Promoter
Domestic Inst & Govt.
Foreign
Public & Others
Average Daily Turnover(6 months)
Volume
Value (Rs million)
1/6/12 Month Rel. Performance (%)
1/6/12 Month Abs. Performance (%)
175170
1.61
39/51/28
38/52/34
124/53
58%
4%
0%
39%
Maximum Buy Price :
Rs
Rs120
Rakesh Tarway
(rakesh.tarway@MotilalOswal.com); Tel: +91 22 30896679