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Tag: Elara Securities

  • What the Zee-Sony settlement means

    What the Zee-Sony settlement means

    (Below is  Elara Securities’ Karan Taurani’s  perspective  on the settling of the dispute between Zee and Sony)

    Mumbai: The above development (settlement by Sony and not imposing a $ 90 mn termination fee to Zee) has no material impact in terms of earnings estimates as this case was a status quo with regulators. We had not factored any adverse impact of the case (Sony Zee merger termination) in our earnings estimates. However, this is seen as a clear respite to ZEEL’s core broadcasting business, which is trading at compelling valuations of seven times to one-year forward PE and has the potential to move towards our target multiple of 11 times PE core broadcasting business.

    We continue to maintain our positive stance on ZEEL, as we expect better growth rates in the festive season (Q3FY25), led by higher ad spends within FMCG verticals; further profitability too will continue to improve helped by cost-cutting initiatives, improved efficiencies, and lower losses in ZEE5, which will drive valuation re-rating. We have a BUY rating on ZEEL with a TP of Rs 210.

    Enclosed below is the link to the last update on Zee: https://tinyurl.com/54updv7x

    Highlights    

    – In an update to the stock exchange, Zee and Sony Pictures India (CMEPL and BEPL) have entered into a settlement to withdraw applications pending lawsuits, claims and counterclaims including a $ 90 mn termination fee, damages etc.

    – The agreements include a) Settlement for all ongoing disputes, b) Withdraw all applications, claims and counterclaims against each other (including a $ 90 mn termination fee), and c) Releasing each other from all claims regarding the transaction documents.

    – The parties have agreed to withdraw all pending applications, claims, and counterclaims filed before the Singapore International Arbitration Centre (SIAC)

    – On 22 Jan 2024, Sony terminated the merger cooperation agreement, and the composite scheme of arrangement originally signed on 22 Dec 2021. Sony immediately sought $ 90 mn in termination fees by filing an appeal with the Singapore International Arbitration Centre (SIAC).

    – The merger was primarily called off due to a dispute on the leadership of the merged entity.

    – The ZEEL had also filed case against Sony India seeking a $ 90 mn termination fee

  • Zee and Sun TV likely to witness opportune times as ad revenue growth returns this festive season: Report

    Zee and Sun TV likely to witness opportune times as ad revenue growth returns this festive season: Report

    Mumbai: Despite facing an adverse impact in the wake of the covid pandemic last year, the media & entertainment industry witnessed some respite in ad revenues for the current quarter-on-quarter (QoQ). According to a report published by Elara Securities (India), in comparison to other traditional media, the television industry has reported healthy growth in the post-covid era. The report also indicated a positive outlook for ad revenues in the upcoming festive season.

    TV Segment: Some respite (QoQ) in ad revenue, led by festive season 

    Traditional advertisers such as fast-moving consumer goods (FMCG) continue to spend on ads, while new-age players such as edtech, fintech, and gaming have chosen to reduce their ad spending. The CPG and automobile industries, as stated in the report, continue to maintain their ad spending, the report highlighted.

    The report noted that Zee group and Sun TV are likely to expect better ad revenue of 3.5 per cent and 6.4 per cent, respectively, while ad revenue may be flat for TV Today. This growth will be driven by some stability in ad spending and the start of the festive season.

    Zee’s subscription revenue, as noted by the report, may decelerate by 1.2 per cent, whereas Sun TV is likely to expect a growth of 4.2 per cent.

    Sun TV reported a growth of 12 per cent as compared to the pre-covid period or FY2020, which also witnessed the absence of income generated from IPL and movies, and stood at 7.4 per cent year-on-year (YoY) of Rs 8,899 million.

    Meanwhile, Zee and TV Today reported 3.7 per cent and 1.1 per cent YoY revenue declines, respectively.

    Zee’s earnings before interest, taxes, depreciation, and amortisation (Ebitda) QoQ margin is expected to rise by 85 basis points (bps), while Sun TV and TV Today to fall by 100 and 535 bps, respectively.

    According to the report, expect margin to be under pressure on content investments for Zee and Sun TV, driven by programming initiatives in Tamil and other genres, and TV Today, on lower YoY revenue and digital segment development, which may also witness the same strain.

    Zee’s and TV Today’s YoY profit after tax (PAT) is estimated to decelerate by 46 per cent and 25 per cent, respectively. TV Today, as the report noted, is estimated to grow by nine per cent.

    Exhibitors – Subdued Q2 hit by weak content

    Multiplexes can experience a series of downgrades due to poor Bollywood content. Large-scale films with poor box office results like Laal Singh Chadha, Raksha Bandhan, Shamshera, and Ek Villain Returns were expected to drive strong Q2FY23 performance, but their failure hit revenue growth for mega-multiples operators PVR and Inox.

    According to the report, Hindi box office revenue has noted a decline of 47 per cent compared to pre-covid levels in Q2FY23, as no film performed except Brahamastra (which recorded Rs 256.25 crore in domestic ticket receipts).

    Domestic box office collections are expected to fall 41.5 per cent and 42 per cent sequentially, respectively, and 35 per cent and 34 per cent as compared to Q2FY20 for PVR and Inox.

    Average ticket price (ATP) and spend per head (SPH), driven by premium content traction, have already outperformed Q2FY20 by 22 per cent and 24 per cent, respectively, in Q1FY23. On low-quality content, ATP/SPH may start getting soft, the report said.

    It further highlighted that ad revenue recovery is delayed and may only revive to a pre-covid level in FY24 and added that this recovery is expected to recover to 60 per cent of pre-pandemic levels of Q2FY20.

    PVR and Inox (including INDAS) are expected to have Ebitda margins of 11.6 per cent and 11 per cent, respectively, in Q2FY23, as screen additions may pick up in H2FY23.

  • Rise in inflation likely to hurt advertising revenue growth of TV broadcasters, says market analyst

    Rise in inflation likely to hurt advertising revenue growth of TV broadcasters, says market analyst

    Mumbai: The rising inflation is playing a spoilsport for the television segment currently, impacting its revenue as advertisers are cutting down the marketing spends. The impact of soaring inflation is observed in one of the most significant categories of the TV industry-FMCG sector. The new age internet companies are also reducing their ad spend. Currently, the advertisers are feeling apprehensive due to the macro weakness and inflationary headwinds.

    Inflation heat to hurt profitability

    As per financial analysts at Elara Securities, television was the first traditional medium to recover to pre-COVID levels in the financial year 2022. The company estimated the operating profitability of all broadcasters to be muted due to content investments and lower advertising revenue.

    Earlier, experts stated that the advertising revenue for television broadcasters is recovering and will reach the pre-covid levels. They predicted that the TV ad revenue will grow 12 per cent in the next financial year. However, the rising inflation has created bottlenecks as companies curtailed their advertising campaigns and adopted a wait-and-watch approach. The FMCG companies also have reported a slowdown in consumer spending. Moreover, the rising input costs also have forced price hikes, which is impacting the overall consumer sentiments and behaviour.

    According to data released by the National Statistical Office (NSO), retail inflation touched 7.04 per cent in May 2022. The Reserve Bank of India (RBI) has updated its inflation projection for the current fiscal (FY23) to 6.7 per cent. 

    According to EY-FICCI’s media & entertainment 2022 report, the television revenue is expected to reach Rs 826 billion by 2024 and will grow at a CARG of 4-5 per cent. In such a case, if the advertisers squeeze their ad spends, it will be difficult for the TV industry to recover and reach the target as estimated, the experts believe. 

    In 2021, television advertising revenue grew 25 per cent to reach Rs 313 billion, recovering from a 21.5 per cent drop in 2020. Due to Covid pandemic pressure, TV advertising revenue declined. Moreover, the ad revenue stood at Rs 320 billion in 2019 during the pre-Covid times. 

    Industry’s observations despite challenges

    Elara Securities also estimated that overall revenue of the major players like Zee, Sun TV and TV Today is slated to grow by 4.7 per cent, 23.2 per cent and 23 per cent year-on-year (YoY), respectively. Zee’s revenue growth is negatively impacted by lower operating income (“Dhaakad film”), while its net profit is expected to witness a growth of 26.4 per cent driven by the redemption of preferential shares (paid off in Q4 FY22).

    Zee’s overall revenue was up by 14.1 per cent YoY in FY22 at Rs 8189.3 crore. Its profit after tax (PAT) was up by 32 per cent at Rs 955.7 crore. Sun TV’s standalone revenues were up by 12.46 per cent YoY in FY22 at Rs 3504.88 crore. TV Today’s overall revenue was up by 18.76 per cent in FY22 at Rs 973.99 crore.

    The company also estimates that advertising revenue for Zee, Sun TV and TV Today will grow 12.7 per cent, 36 per cent and 28 per cent YoY, respectively, on a low base, as they remain between two per cent to ten per cent lower than pre-Covid levels. Subscription revenues for Zee and Sun TV are expected to remain flat YoY.

    Zee’s advertising revenue in FY22 stood at Rs 4396.5 crore up by 18 per cent YoY. Its subscription revenue stood at Rs 3246.6 crore. Sun TV’s advertising revenues in FY22 stood at Rs 1300.60 crore up by 30.84 per cent and subscription revenues stood at Rs 1657.13 crore. TV Today’s revenue from television and other media operations stood at Rs 912.03 crore, up by 17.8 per cent in FY22.