Thursday, July 1, 2010


The media sector reported better-than-expected results in FY10. Robust revenue growth and strong margin expansion resulted in the profitability of some companies almost doubling. Others consolidated their operations in the financial year. We maintain our Overweight stance on the sector, and prefer broadcasters to print media.

FMCG advertisers to drive broadcasters’ revenue: Sustained high advertising and promotion expenses by FMCG companies would mainly benefit broadcasting companies. FMCG accounts for more than 55% of spending on television.

Consolidation – the mantra in FY10: FY10 was the year of consolidation for the media industry. For instance, the Zee group consolidated its general entertainment channels (GECs) under Zee Entertainment. TV Today and DB Corp consolidated their radio businesses and HT Media de-merged its Hindi daily for an IPO.

High dividend payout: Companies paid higher-than expected or in-line dividends through special or interim dividends during the year. Broadcasting companies have increased the dividend payout ratio, while print companies have slightly reduced the same.

Prefer broadcasters to print players: We prefer broadcasters to print companies, considering that ad revenue growth for broadcasters is expected to be over 15%. DTH subscription revenues are expected to increase. With carriage and placement costs
remaining flat and programming expenses under control, we expect margins to expand.

Top picks and top sells: We maintain our Overweight rating on the sector. We have a Buy on Sun TV Network, Zee Entertainment and Jagran Prakashan; Hold on ENIL, HT Media and Info Edge; and Sell on Balaji Telefilms.

To read the full report: MEDIA SECTOR