CMP: Rs. 227.80; Buy at
current levels.
Short term Target: Rs. 260.00; Medium to Long term Target: Rs. 300; STOP LOSS – Rs. 209.50; Market Cap: Rs. 1,356.50 Cr; 52 Week
High/Low: Rs. 243.85 / Rs. 73.25; Total Shares: 5,95,48,115 shares;
Promoters : 3,42,50,171 shares – 57.52 %; Total Public holding : 2,52,97,944
shares – 42.48 %; Book Value: Rs. 63.66; Face
Value: Rs. 5.00; EPS: Rs. 13.79; Dividend: 20.00 % ; P/E: 16.51 times; Ind. P/E: 32.68;
EV/EBITDA: 8.48.
Total Debt: ZERO Cr; Enterprise Value: Rs. 1,301.58 Cr.
TV TODAY NETWORKS LIMITED: TV Today Network Ltd was
incorporated in December, 1999 and is based in Noida, India. The company is a subsidiary of Living Media India
Limited. TV Today Network Limited is
engaged in television and radio broadcasting business in India. It operates
news channels, including Aaj Tak, a news channel; Headlines Today, a 24 hours
English news channel; Tez, a Hindi news channel; and Dilli Aaj Tak, a metro
centric channel. The company came out with an IPO of about 1,45,00,000 lakh shares
of Rs. 5 each in December 2003 at Rs. 95 per share raising Rs. 137.75 Cr. The
company, TV Today is in the business of TV
Broadcasting and Radio Broadcasting. TV Today Network (TV Today) is
a part of the India Today Group and a leading news broadcaster in India. It
operates as a subsidiary of Living Media, the holding company of the India
Today group of publications. Aroon Purie is the Chairman of Living Media. He
has been associated with the news business for the past three decades and
consistently maintained the company as a leader owing to his vast experience.
TV Today is one of the leading news broadcasters in India with four channels
viz. Aaj Tak, Headlines Today, Delhi Aaj Tak and Tez distributed by MSM
Discovery. TV Today is the first Indian broadcaster to uplink a 24 hour Hindi
news channel from India. The company has an undisputed leadership position in
the Hindi news segment through Aaj Tak. In addition, Radio Today Broadcasting
Ltd, a fellow subsidiary, merged with the company extending the presence of TV
Today to the radio segment under the brand Oye 104.8 FM. Its subsidiaries are T.V Today Network (Business)
Ltd, Thomson Press India, Today Merchandise Pvt Ltd, Radio Today Broadcasting
Ltd, and Mail Today Newspapers Pvt Ltd, Integrated Databases India Ltd. TV Today Networks Ltd can be locally be
compared with Zee Entertainment Media Ltd, Zee Media Corporation Ltd, Broadcast
Initiatives Ltd, Hinduja Ventures Ltd (parent), Balaji Telefilms Ltd, B.A.G
Films & Media Ltd, New Delhi Television Ltd, Sri Adhikari Bros Tele
Network, Sun TV Network Ltd, Network 18 Media & Investment Ltd and TV18
Broadcasts Limited, Raj Television Networks Ltd, and Globally with New Media
Investment Group Inc of USA, Starz Group of USA, Dreamworks Animation SKG of USA,
Cairo Communication S.p. A of Italy, Chime Communications Plc of UK, Constantin
Medien AG of Germany, Sony Corp of Japan, CTC Media Inc of Russia, Mediaset
Espana Comunicacion, S.A of Spain, Alibaba Pictures Group Ltd of Hong Kong,
Asian Pay Television of Singapore, Fairfax Media Ltd of Australia, Hong Kong
Television Network of Hong Kong, Times Media Group Ltd of South Africa, Naspers
Ltd of South Africa, Caxton and CTP Publishers and Printers Ltd of South Africa.
Investment Rationale:
Outlook and Valuation:
TV Today Network Ltd is the parent company of
India’s very well-known Hindi News Channel AAJ
TAK. The company enjoys greater market share in terms of viewership as well as
in terms of ad revenue in Hindi language news channel. Owing to its strong presence and a
viewership share of 18.5 %, Aaj Tak has been able to constantly take price
hikes and dictate terms with advertisers. The company has seen an increase in
inventory from 16 minutes to over 20 minutes as demand for advertisements rose
in its platform. As of now, the company is maintaining its inventory at 18
minutes per hour. With a viewership share of 18.5 %
in the Hindi news segment and 8.7 % of the overall news segment, Aaj Tak commands
an impressive 23 % in FY13 of Hindi news and 9.2 % of overall news
advertisement revenues. This signifies advertiser’s preference for Aaj Tak in a
fiercely competitive segment populated with 392 news & current affair
channels. According to Census 2011, around 41.0 % of the Indian population
speaks Hindi, followed by Bengali (8.1%), Telugu (7.2%), Marathi (7%) and Tamil
(5.9%). The demographic set-up augurs well for TV Today with its offerings in
terms of Hindi news channels, which is also reflected in its higher share of
advertisement revenue. Once the industry fully shifts to the cost per
subscriber (CPS) model, TV Today is expected to witness an exponential growth
in subscription revenue. Nonetheless, it will still take a while before higher
subscription revenue starts accruing as digitisation is delayed. With
digitisation, there has been an unprecedented increase in the channel carrying
capacity of distributors with the total number of channels increasing from
about 80 in analogue cable to over 1000 channels in digital. The increase in
carrying capacity has brought a reduction in carriage costs for all
broadcasters. This reduction in carriage fees is critical for news
broadcasters, as for them carriage payouts are significantly higher than
subscription revenues. News broadcasters shell out about 25-30 % of their total
revenue in the form of carriage and placement fees. English news channels spend
approximately 70 % of their distribution costs as carriage in the metros and
are yet to receive an equivalent benefit in terms of subscription from the
metros.
Other channels such as Delhi Aaj Tak, Tez and Headlines Today form a very small
part of TV Today’s topline as of now. Some of them are free to air (FTA)
channels and the company plans to gradually monetise all of them. Even the
channel Delhi Aaj Tak, which is a Delhi centric channel, is gaining momentum.
Company’s Radio business, Radio Today Broadcasting Ltd, a fellow subsidiary,
got merged with the company extending its presence of TV Today in the radio segment
under the brand Oye 104.8 FM and has a presence in the six cities of Mumbai, Delhi,
Kolkata, Amritsar, Jodhpur and Patiala. However, the company has been unable to
keep pace with its peers in the radio segment and has been experimenting with
different formats. It started off as Meow 104.8 FM for women in 2007. However,
since the strategy did not click with listeners, the company re-branded itself
to Oye 104.8 FM based on the “filmy” format Radio’s current contribution to the
overall revenues of the company is minuscule at 4 %. Though the radio industry
is expected to grow at 18.1 % CAGR in FY13-18E, company’s radio business is
expected to do well. Moreover, once the regulator allows the broadcast of live
news on radio, Aaj Tak may be able to leverage its dominance in the Hindi news content
on radio. India is likely to witness a data and Internet revolution in the
coming future, which holds good opportunity for all content rich businesses.
The delivery platforms would be amplified creating more demand for the content.
Mobiles, wireless internet users (mobile + dongle) have already reached about
23.26 Cr users at the end of March 2014 and the number is expected to go up
dramatically. Also, when compared to the global level, India imported the
highest number of smart phones. With the launch of several OTT applications and
mobile applications, people can conveniently watch videos on their cell phones.
This opens up more avenues for the delivery of content. TV Today’s news would
also reach such additional platforms, which would open up new avenues for
revenue growth. TV Today posted 24.6 % revenue growth in FY14, partly aided by
higher government spending in an election year. Moreover, it already clocked in
54.1 % revenue growth in Q1FY15 on account of higher share of advertisement on
news channels in the backdrop of general elections in May. As election euphoria
has settled and the economy started to turn around, its revenues are expected
to grow at a moderate pace and expected to clock a CAGR of 15.5 % (FY14-FY16E).
Revenue growth would be primarily led by improving ad yields in the flagship
channel coupled with improving utilisation in other channels. While
advertisement revenues are expected to grow in tandem with the economy,
subscription revenues would be directly correlated to the progress in digitisation.
Advertisement revenues and subscription revenues are expected to grow at 16.4 %
in FY15E and 7.5 % FY16E. The radio segment is also expected to grow at 26.5 %
CAGR over FY14- 16E. Moreover, the company also plans to participate in Phase
III auctions and further augment its radio footprint. This extended presence
would also drive its revenues, going ahead. The company is expected to be cash
flow positive and, hence, would be able to fund its capex requirements
internally. The dividend payout by TV Today has ranged between 38 % and 45 % in
FY11 to FY13, respectively. FY14 has been an inflection point for the company
with the company’s profits nearly quadrupling from the year ago period.
Consequent to this, the return ratios, RoCE and RoNW, have reached 22.4 % and
16.2 % in FY14 from 4.0 % and 3.8 % in FY13, respectively. Going ahead, with
improving operating leverage and lower capex outlay, the return ratios are
further expected to improve. TV today continues to enjoy best operating
metrics. TV Today had been trading at an average 18x one year forward P/E
during economic upturn cycle in FY04-09. The stock has traded at an average one
year forward multiple of 20.3x, over the last 10 years, which covers both high
and low economic cycles. However, with the economy still in the earlier phase
of revival, and valuing the company at 15x FY16E which will be 25 % discount to
the 10 year average P/E which gives the a target price of Rs. 300. At the
current market price of Rs. 227.80, the
stock P/E ratio is at 13.89 x FY15E and 11.39 x FY16E respectively. Company can
post Earning per share (EPS) of Rs. 16.40 for FY15E and Rs. 20.00. One can buy
this stock with a target price of Rs. 260.00 and for
Medium to Long term investment it should be Rs. 300.
| KEY FINANCIALS | FY13 | FY14 | FY15E | FY16E |
|---|---|---|---|---|
| SALES (₹ Crs) | 312.70 | 389.40 | 475.70 | 519.30 |
| NET PROFIT (₹ Cr) | 12.20 | 61.30 | 97.80 | 119.00 |
| EPS (₹) | 2.10 | 10.30 | 16.40 | 20.00 |
| PE (x) | 102.90 | 20.50 | 12.80 | 10.60 |
| P/BV (x) | 3.90 | 3.30 | 2.80 | 2.30 |
| EV/EBITDA (x) | 35.90 | 11.00 | 6.80 | 5.30 |
| ROE (%) | 3.80 | 16.20 | 21.50 | 21.60 |
| ROCE (%) | 4.00 | 22.40 | 30.40 | 30.30 |
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