Bma Media 29may08
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Indian Media and Entertainment Industry Industry Overview: The Indian Entertainment and Media Industry have out-performed the Indian economy and is one of the fastest growing sectors in India. It is rising with the economic growth and rising income levels that India has been experiencing in the past years. According to FICCI-PWC report on “Media & Entertainment- 2008” it recorded a growth of 17% in 2007 over previous year.
Industry size estimated Rs. 51,300 Crore in 2007, up from Rs. 43,800 Crore in 2006. Advertising industry recorded a growth of 22% in 2007 over 2006 to reach Rs. 19,600 Crore in 2007, up from Rs. 16,100 Crore in 2006; contributed 38% of the industry’s revenues. Indian E&M Industry projected to grow by 18% cumulatively over the next five years; projected to reach Rs. 1,15,700 Crore by 2012. Foreign investments in the E&M industry reached a record high of US $211 million.
The industry saw the entry of new players and existing players expanding by diversifying into new segments, spreading their presence across value chains, broadening their horizons by increasing their geographic presence. The advertising industry is experiencing a paradigm shift with digital platforms enabling to reach the critical mass. This had resulted in consumers shifting from passive mediums to spending more time on digitally interactive mediums. Internet and mobile are two keys enablers for the same. Internet advertising is estimated at Rs 420 Crore in 2008 growing at 32% CAGR, expected to touch Rs 1100 Crore in 2012.
Segmental Outlook:
Television industry is transforming with digitalization of distribution networks through increase in DTH subscribers which projected to grow at 44% CAGR over the next five years. CAS was made mandatory from January 1, 2007, but saw lukewarm response during the year.
Projected Market Size - Television 55000 45000 Rs Cr
Television Industry: The television industry in India is currently at its best. It has contributing the largest share in the Indian E&M industry in the last few years. Current size: Rs. 22,600 Crore; Projected size in 2012: Rs. 60,000 Crore Growth in 2007 over 2006: 18%; CAGR 2008-2012: 22%.
35000 25000 15000 06
07
08 E
08 E
10 E
11 E
Print/Animation/Gaming Industry: Projected Market Size - Print Media
Rs Cr
22000 19000 16000 13000 10000 06
07
08 E
08 E
10 E
11 E
Segments like print media, animation and gaming are also likely to see interesting growth rates. According to NASSCOM, the Indian gaming market is likely to grow 72 per cent from US$ 48.51 million in 2006 to US$ 429.54 million in 2010. Similarly, the Indian animation services industry is likely to grow at a CAGR of 25 per cent from US$ 354 million in 2006 to US$ 869 million in 2010. Current size (Print Media): Rs. 14,900 Crore; Projected size in 2012: Rs. 28,100 Crore Growth in 2007 over 2006 (Print Media): 16%; CAGR 200812: 14%
Indian Media & Entertainment Industry
Film Industry: The Indian film industry, with over 300 Crore admissions per annum, is the largest in the world, in terms of number of films produced per year. This industry, which was worth US$ 2.12 billion in 2006, is estimated to grow at a CAGR of 13 per cent to US$ 4.42 billion by 2011. One perceptible change has been the rapid growth of multiplexes, which meets consumer demand for quality entertainment and has also helped boost production of niche films targeted at niche audiences. Current size: Rs. 9,600 Crore; Projected size in 2012: Rs. 17,600 Crore Growth in 2007 over 2006: 14%; CAGR 2008-12: 13%
Projected Market Size - Film Industry 17000 Rs Cr
BMA Research Desk
14000 11000 8000 5000 06
07
08 E
08 E
10 E
11 E
Radio Industry:
Rs Cr
Projected Market Size - Radio
Radio regulator TRAI has recommended to Government for allowing news on radio and increasing the FDI limit amongst other provisions; these recommendations are expected to make radio more favorable with advertisers. Current size: Rs. 620 Crore; Projected size in 2012: Rs. 1800 Crore Growth in 2007 over 2006: 24%; CAGR 2008-12: 24%
1950 1700 1450 1200 950 700 450 200 06
07
08 E
08 E
10 E
11 E
Segment wise projected growth: Sectors Overall Television Filmed Entertainment Print Media Radio Music Animation, Gaming & VFX OOH advertising Online advertising
SIZE IN 2007 (RS. CR) 51300 22600 9600 14900 6200 7300 1300 1250 270
GROWTH 2007 over 2006 17% 18% 14% 16% 24% 1% 24% 25% 69%
SIZE IN 2012 (projected) (RS. CR) 115700 60000 17600 28100 1800 800 4000 2400 1100
CAGR 2008-12 18% 22% 13% 14% 24% 2% 25% 14% 32%
Source: FICCI PWC Report
Conclusion: March 08 is the best quarter for the media industry with the union budget being the key revenue driver. We expect media companies to register a 45.6% year-on-year (y-o-y) growth in revenues with TV18 and Zee News putting up a strong show. However the net profit growth on an overall basis is expected to be 28.4% with Zee News outperforming its peers. Consequently, other major companies like PVR, Deccan Chronical, HT Media yet to announce there results, which are expected to be positive. Other entertainment content areas like music and television also have a huge potential international market. Among the entertainment pack we found that fundamentally PVR, Deccan Chronicle, Balaji Telifilms and HT Media are at attractive level to accumulate on decline. These scripts are good investments for long term perspective. The business model of these companies is unique and banking on huge potential of media industry one can invest in these stocks.
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2
BMA Research Desk
Indian Media & Entertainment Industry
Brief Coverage – Accumulate
Deccan Chronicle Holdings Ltd (CMP: 145.10)
Week End Sensex Nifty Rating Target
Highlights:
May 16, 2008 17434.94 5157.70 Accumulate 204 (Long term)
Basic Stock Data Face Value (Rs) Share Outstanding (Cr) Latest P/E (x) Latest M-Cap (Cr) TTM EPS (Rs) Book Value Avg. Daily Volume Beta (4/06 – till date) 52 W H/L Bonus History Dividend (%) Dividend Yield (%)
2.00 24.49 12.05 3553.50 12.04 36.27 480466 0.8138 270/134 Nil 50.00 0.69
Deccan Chronicle Holdings Ltd, the publisher of popular English daily ‘Deccan Chronicle’ has been in the limelight after publishing its first business daily ‘Financial Chronicle’ in Hyderabad and Chennai market. We expect both sales and PAT to register a CAGR FY 07-11 of 34% and 37% respectively backed by positive industry outlook, raising advertising tariff across the board and geographical expansion. Based on discounted cash flow method, we have derived valuation of Rs. 204 per share for Deccan Chronicle, which is 40% higher than the current market price. A gradual accumulation can be considered in Deccan Chronicle Holdings Ltd at this level, with 12 months price target of Rs. 204. Investment Rationale:
Print on a roll in the south: The battle for the Rs 1,000-crore print media advertisement market in Chennai has just got hotter with the launch of the financial daily -- Financial Chronicle -- from the Deccan Chronicle group. The paper introduced former chairman of SEBI M. Damodaran as its ombudsman, a first for financial daily in India.
Shareholding Pattern
Promoter Foreign Institutions Public & Others
Joint venture: The Company had formed a joint venture company with Group M (a WPP company) to explore and create a market in the Sport and Event Management space through its wholly owned subsidiary Sieger Solution Ltd.
Revenue likely to go up: it has increases its advertising revenue by 30% with its immediate effect from last month. Revenue from new English daily is also expected although the print market is crowdie.
Strong fundamental: Turnover ratios like fixed assets turnover, Inventory turnover are well and above than industry average and better than other peer companies. Operating margin is very high and ROCE and RONW are larger than industry average.
Industry growth potential: According to FICCI-PWC report, new editions and forays into e-publishing are driving growth in print media. The sector is expected to grow at 14% CAGR to Rs. 28100 crore from Rs. 14900 crore in five yrs. Magazine publishing is expected record a 15% CAGR to 3800 crore, doubling from 1900 crore today.
60.88% 20.38% 13.14% 5.60%
Relative Performance
% Chg
195 155 115
DC
M ar 08
07 D ec
Se p
07
07 Ju n
Ap r0 7
75
Sensex
Financial Highlights:
Analyst Debjit Adak, [email protected] Chandan Ghosh, [email protected]
Rs Cr Sales Growth (%) PAT Growth (%) EPS OPM (%) RONW (%)
200703 552.78 67.06 161.36 137.78 6.61 52.84 28.19
200803E 817.32 47.86 293.38 81.81 12.22 59.45 27.63
200903E 1062.52 30 381.39 30 15.89 63.34 27.9
201003E 1281.27 20.59 459.91 20.59 19.16 65.12 26.51
201103E 1595.55 24.53 572.72 24.53 23.86 66.5 26.12
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3
BMA Research Desk
Indian Media & Entertainment Industry
Brief Coverage – Accumulate
PVR Ltd (CMP:190)
Week End Sensex Nifty Rating Target
Highlights:
May 16, 2008 17434.94 5157.70 Accumulate 356 (Long term)
Basic Stock Data Face Value (Rs) Share Outstanding (Cr) Latest P/E (x) Latest M-Cap (Cr) TTM EPS (Rs) Book Value Avg. Daily Volume Beta (4/06 – till date) 52 W H/L Bonus History Dividend (%) Dividend Yield (%)
10.00 2.30 21.25 437.19 8.94 78.39 21034 0.6084 376/160 Nil 10.00 0.53
Investment rationale:
Shareholding Pattern Promoter Foreign Institutions Public & Others
Enormous Expansion Plan: PVR will be investing Rs. 400 Crore over the next three years to set up 250 multiplexes across India. Out of 250, 40 will be PVR Prime, which is for high end viewers, where ticket price will be in the range of Rs. 300- Rs. 750 compared to the normal price of Rs. 120 – Rs. 150 per share.
Entered into production and distribution business: To operate a film distribution and production business through our 100% subsidiary, PVR Pictures, acquires and distributes Indian and international films. Its first Coproduction “Taare Zameen Par”, which was released during December 2007, has received good reviews and demonstrated strong box office performance.
Out of home entertainment (OOH): To ramp up its presence across retail entertainment landscape, PVR has entered into a JV with Major Cineplex Group, a leading Film exhibition and retail entertainment company based out of Thailand, to bring lifestyle entertainment concepts to Indian consumers. The Joint Venture would set-up bowling alleys, karaoke centers, ice skating rinks and gaming zones across the country to enhance the out of home entertainment experience for Indian consumers.
Strong performance: Add the latest initiative, which is the film production initiative, which is kicked off very well with Taare Zameen Par being doing very well. The food court initiative along with the Amit Burman, a very interesting business mix evolving. Operating margins to the north of 25% with return on capital employed on an individual project basis around 25% and just 12-times one-year forward earnings with a 60% top line visibility for the next two-years.
40.51% 31.33% 9.34% 18.82%
Relative Performance 250 % Chg
PVR Ltd, the premium multiplex company, is all set to become a media giant in line with big brothers like Adlabs and Pyramid saimira. The company will invest around Rs. 400 Crore in setting up 250 screens (at present it runs with 103 screens) over the period of three years. As per our estimation, both the sales and PAT to grow at a rate of 43% and 61% (CAGR FY 07-11) , backed by buoyancy in the multiplex sector, which has been growth at a rate of 40% during the last couple of years and company’s ambitions expansion plan. Based on discounted cash flow, we have derived a valuation of Rs. 356 per share for PVR, which is 89% higher than the current market price of Rs. 190. We recommended gradual accumulation of PVR in every decline with 18 month’s price target of Rs. 356.
200 150 100
08 M ar 08
ec D
07
07 Se p
Ju n
Ap r0 7
50
PVR
Sensex
Financial Highlights:
Analyst Debjit Adak, [email protected] Chandan Ghosh, [email protected]
Rs Cr Sales Growth (%) PAT Growth (%) EPS (Rs) OPM (%) RONW (%)
200703 164.72 54.46 11.06 92.76 3.95 17 5.42
200803E 251.27 52.54 24.32 119.92 9.73 22.96 8.83
200903E 351.78 40 36.25 49.04 14.5 23.38 12.29
201003E 492.49 38.45 52.63 45.19 21.05 23.14 17.8
201103E 689.48 35.67 75.87 44.15 30.35 22.91 21.29 Page
4
BMA Research Desk
Indian Media & Entertainment Industry
Brief Coverage – Accumulate
Balaji Telefilms Ltd (CMP: 174.65)
Week End Sensex Nifty Rating Target
Highlights:
May 16, 2008 17434.94 5157.70 Accumulate 257 (Long term)
Basic Stock Data Face Value (Rs) Share Outstanding (Cr) Latest P/E (x) Latest M-Cap (Cr) TTM EPS (Rs) Book Value Avg. Daily Volume Beta (4/06 – till date) 52 W H/L Bonus History Dividend (%) Dividend Yield (%)
2.00 6.52 13.01 1138.72 13.01 46.65 169811 0.3978 388/165 Nil 175.00 2.08
Balaji Telefilms Ltd (BTL) contents cater to a wide spectrum of audience through its diverse software which includes Sitcoms, Soaps, Game Show, Suspense and Thriller and children’s program in Hindi as well as regional languages. The company’s success in Television Software market is attributed to its early entry into the market. The company has set up state of art studio and postproduction facilities at all its centers. Backed by strong acceptance of its productions, upcoming serials, we expect top line and bottom line to grow at a rate of 15% and 22.5% respectively between 2007 to 2011 (CAGR). Based on DCF method, we have derived a valuation of Rs. 257 per share, which is 51% higher than the current market price of Rs. 174.65. We recommended gradual accumulation on Balaji Telefilms with 12 months price target of Rs. 257.
Investment rationale:
Strong business model: The Group's principal activity is production and distribution of motion pictures and feature films. The Group operates in two segments Commissioned Programmes, Sponsored Programmes and Feature Films. Commissioned Programmes include the sale of television serials to channels, Sponsored Programmes include the telecasting of television serials on channels and Feature films include production and distribution of films. It provides television, entertainment and other related services in India.
High TRP ratings: A high TRP rating to its productions is one of the positive aspects of the company. Success comes with its fare share of criticism. But for sheer intensity, nothing can rival the kind of barbs that have been regularly hurled at production house Balaji Telefilms and its creative director Ekta Kapoor, the chief chef of that unique concoction called the great Indian soap. Its new production “Kahaani Aurat kii” is about to hit in next few months.
JV with Star Group will pay in the future: Most recently company has entered into a Joint venture (51% Star and 49% Balaji) with Star Group to create a bouquet of regional language general entertainment channels, which initially targeting at the southern Indian market. Star will be responsible for operations of the channels, where as Balaji will produce regional language shows exclusively for the venture. We expect the venture will perform well in the future as both the parties have rich experience in their respective areas.
Shareholding Pattern Promoter Foreign Institutions Public & Others
40.00% 39.92% 11.61% 8.47%
Relative Performance
% Chg
400 300 200 100
M ar 08
07
07
Balaji
D ec
Se p
Ap r0 7 Ju n 07
0
Sensex
Financial Highlights:
Analyst Debjit Adak, [email protected] Chandan Ghosh, [email protected]
Rs Cr Sales growth(%) PAT growth(%) EPS (Rs) OPM(%) RONW(%)
200703 317.47 13.23 80.63 33.68 11.69 40.63 28.64
200803E 327.45 3.14 88.67 9.97 12.87 43.88 21.63
200903E 392.94 20 113.06 27.52 16.41 46 22.6
201003E 471.53 21.2 136.54 20.76 19.82 46 22.4
201103E 565.83 15.25 181.86 33.2 26.4 51 24.09 Page
5
BMA Research Desk
Indian Media & Entertainment Industry
Brief Coverage – Accumulate
HT Media Ltd (CMP: 140.15)
Week End Sensex Nifty Rating Target
Highlights: HT Media Ltd, promoted by Hindustan Times Ltd (a leading Newspaper publishing company) was incorporated on December 3, 2002. At present HTL holds 68.73% of shares of HT Media Ltd. HT Media is a major player in the print media in India. It has a leadership position in the English newspaper market in North India and the second position in the Hindi newspaper market in the North and East. Backed by rapid expansion plan in tier – II and tier III cities of Northern India, successful launching of business daily ‘Mint’ as well as capex plan of Rs. 200 crore to have 10 new printing locations; we have projected a top line and bottom line growth of 29% and 41% respective (CAGR 2007-2011). Based on discounted cash flow method, we have derived a valuation of Rs. 230 for HT media which is 61% higher than the current market price. A gradual accumulation can be considered at this level for long term investment purpose with 15 months price target of Rs. 230.
May 16, 2008 17434.94 5157.70 Accumulate 230 (Long term)
Basic Stock Data Face Value (Rs) Share Outstanding (Cr) Latest P/E (x) Latest M-Cap (Cr) TTM EPS (Rs) Book Value Avg. Daily Volume Beta (4/06 – till date) 52 W H/L Bonus History Dividend (%) Dividend Yield (%)
2.00 23.24 25.86 3282.31 5.42 33.47 39127 0.4792 266/128 Nil 15.00 0.21
Investment rationale:
Rapid Expansion Plan: Consolidating presence in existing businesses caused revenue growth of over 30% and into aggressive expansion of readership base. Successful new launches in Merrut/ Agra/ Kanpur and many other places in UP. The company has launched its Hindi daily “Hindustan” in Aligarh recently. Pan India presence is one of the main competitiveness of this organization.
Growth Strategy: There are many growth strategy adopted by HT Media are expand English franchise across metros, Enter new Hindi market, Extend Mint footprint, Continuing to invest in printing and infrastructure hub, complement print with internet/ magazines.
Diversification into e-business and FM radio space: Company’s’ subsidiary Firefly e-ventures has launched job portal www.shine.com, and we expect the venture to be successful as the portal will get back-up from its the versions Hindustan Times, Hindustan and Mint. Another social network site www.desimatri.com has been doing well and company has planned to launch other site in matrimonial, real estate and auto verticals. Fever FM, the radio JV with Virgin has been successfully running in Delhi, Kolkata, Mumbai and Bangalore and will be extending its footprint in other cities also.
Strong Fundamentals: Low Debt Company having enough growth potentials. High turnover ratio and high return on net worth give strong massage to its shareholders. Looking at strong last three quarter and attractive industry position one can invest for 1 yr down the line. Its ebusiness, radio businesses are also in growing phase.
Shareholding Pattern Promoter Foreign Institutions Public & Others
68.73% 17.96% 9.40% 3.91%
Relative Performance 210
%
160 110
07
M ar 08
HT Media
D ec
07 Se p
07 Ju n
Ap r0 7
60
Sensex
Financial Highlights:
Analyst Debjit Adak, [email protected] Chandan Ghosh, [email protected]
Rs Cr sales growth(%) PAT growth(%) EPS OPM(%) RONW(%)
200703 1039.3 26.17 118.71 208.72 4.95 22.18 15.15
200803E 1320.46 27.05 219.74 85.11 10.06 29.2 22.9
200903E 1716.6 30 273.09 24.28 12.5 27.71 23.18
201003E 2231.58 28.45 360.74 32.1 16.51 27.71 24.6
201103E 2901.05 25.67 475.72 31.88 21.77 27.71 25.75 Page
6
Valuation Using DCF Method: Deccan Chronicle Rs Cr sales other income expenses PBDIT Interest PBDT dep PBT tax PAT add: dep working cap cash from op. capex FCF PV Total PV terminal val total firm value share price (Rs)
0603 331 21 227 125 19 106 10 96 28 68 78 175 -97 41 -137
0703 553 32 295 291 33 257 17 240 79 161 178 290 -111 12 -124
0803E 817 49 327 539 76 464 32 431 138 293 326 305 21 14 7 7
0903E 1063 64 425 701 98 603 42 561 179 381 424 366 58 21 36 33
1003E 1281 77 513 846 118 727 51 676 216 460 511 403 108 32 77 64
1103E 1596 96 638 1053 147 906 63 842 270 573 636 463 173 47 126 97
1203E 1796 108 718 1185 166 1019 71 948 303 645 716 533 183 51 133 94 296 1623 1919 204
Disclaimer: This document is for private circulation only. Neither the information nor any opinion expressed constitutes an offer, or any invitation to make an offer, to buy or sell any securities or any options, future or other derivatives related to such securities. BMA Wealth Creators Pvt. Ltd. Or any of its associates or employees doesn’t except any liability whatsoever direct or indirect that may arise from the use of the information herein. BMA Wealth Creators (P) Ltd. And its affiliates may trade for there own accounts as market maker, block positional, specialist and/or arbitrageur in any securities of this issuer (s) or in related investments, may be on the opposite side of public orders. BMA Wealth Creators (P) Ltd. and its affiliates, directors, officers, employees, employee benefit programs may have a long or short position in any securities of this issuer (s) or in related investments no matter content herein may be reproduced without prior concert of BMA. While there report has been prepared on the basis of published/other publicly available information considered reliable, we are unable to accept any liability for the accuracy of its contents.
PVR Rs Cr sales other income expenses PBDIT Interest PBDT dep PBT tax PAT add: dep working cap cash from op. capex FCF PV Total PV terminal val total firm value share price (Rs)
0603 103 3 87 19 3 16 7 9 3 6 13 73 -60 58 -118
0703 165 7 139 33 6 28 12 15 4 11 23 -43 66 18 48
0803E 251 9 203 58 6 52 16 36 11 24 40 6 35 14 21 21
0903E 352 12 281 82 10 72 19 53 17 36 55 7 49 21 28 25
1003E 492 15 394 114 14 100 23 77 25 53 76 7 68 32 37 31
1103E 689 20 552 158 19 139 27 112 36 76 103 8 95 47 48 37
1203E 864 26 691 199 24 175 33 142 45 97 130 10 120 51 69 49 163 703 866 356
BMA Wealth Creators Pvt. Ltd Corporate Office: INFINITY, Think Tank -1, 3rd Floor, Plot No. - 43; Block – GP, Sector V, Salt Lake; Kolkata - 700091 Telephone: +91-33-40110099, Fax - +91-33-23675230 Website: www.wealth-creators.in
Valuation Using DCF Method: Balaji Telefilm Rs Cr sales other income expenses PBDIT Interest PBDT dep PBT tax PAT add: dep working cap cash from op. capex FCF PV Total PV terminal val total firm value share price (Rs)
HT Media 0603 280 9 187 102 0 102 14 88 29 59 73 -17 90 5 85
0703 317 13 201 129 0 129 11 118 37 81 92 35 57 4 53
0803E 327 21 204 144 0 144 13 130 42 89 102 30 72 5 67 67
0903E 393 24 236 181 1 180 13 166 53 113 127 36 90 8 83 76
1003E 472 28 283 217 1 216 15 201 64 137 152 40 112 11 100 85
1103E 566 34 311 289 1 288 20 267 86 182 202 46 156 17 139 107
1203E 679 41 373 346 1 345 24 321 103 218 243 53 190 25 164 116 451 1746 1746 257
Rs Cr sales other income expenses PBDIT Interest PBDT dep PBT tax PAT add: dep working cap cash from op. capex FCF PV Total PV terminal val total firm value share price (Rs)
0603 824 18 728 113 14 100 39 61 20 41 80 327 -248 4 -251
0703 1039 40 849 230 14 216 40 177 58 119 158 -239 398 19 379
0803E 1320 36 971 386 18 368 45 323 103 220 265 36 229 21 209 21
0903E 1717 47 1287 476 20 456 54 402 129 273 327 43 284 31 254 233
1003E 2232 61 1674 618 23 595 65 530 170 361 425 47 379 46 332 280
1103E 2901 79 2176 804 27 777 78 700 224 476 553 54 500 69 430 332
1203E 3481 102 2611 973 31 942 93 849 272 577 670 62 608 51 558 395 1261 4391 5652 230
Branch Network:
Lee Road (Kolkata): 09339566685, RN Mukherjee (Kolkata): 033 – 30286331, Swaika Centre (Kolkata): 09339749605, Asansol: 09233300944, Balasore: 09437062357, Bangalore: 09341555728, Chennai:044-42694302, Cuttack: 09861047027, Bhubaneshwar:09237004733, Hyderabad: 040-40194301, Coimbatore: 0422-4370581, Burdwan: 09332800003, Delhi: 09313665610, Siliguri: 09832460247,Jamshedpur: 09334321561, Tamluk: 09332239796, Noida: 09313665610, Salt lake: 09331928944, Salem: 0427-4264968, Varanasi: 09335070089, Durgapur: 09332800003
Industry size estimated Rs. 51,300 Crore in 2007, up from Rs. 43,800 Crore in 2006. Advertising industry recorded a growth of 22% in 2007 over 2006 to reach Rs. 19,600 Crore in 2007, up from Rs. 16,100 Crore in 2006; contributed 38% of the industry’s revenues. Indian E&M Industry projected to grow by 18% cumulatively over the next five years; projected to reach Rs. 1,15,700 Crore by 2012. Foreign investments in the E&M industry reached a record high of US $211 million.
The industry saw the entry of new players and existing players expanding by diversifying into new segments, spreading their presence across value chains, broadening their horizons by increasing their geographic presence. The advertising industry is experiencing a paradigm shift with digital platforms enabling to reach the critical mass. This had resulted in consumers shifting from passive mediums to spending more time on digitally interactive mediums. Internet and mobile are two keys enablers for the same. Internet advertising is estimated at Rs 420 Crore in 2008 growing at 32% CAGR, expected to touch Rs 1100 Crore in 2012.
Segmental Outlook:
Television industry is transforming with digitalization of distribution networks through increase in DTH subscribers which projected to grow at 44% CAGR over the next five years. CAS was made mandatory from January 1, 2007, but saw lukewarm response during the year.
Projected Market Size - Television 55000 45000 Rs Cr
Television Industry: The television industry in India is currently at its best. It has contributing the largest share in the Indian E&M industry in the last few years. Current size: Rs. 22,600 Crore; Projected size in 2012: Rs. 60,000 Crore Growth in 2007 over 2006: 18%; CAGR 2008-2012: 22%.
35000 25000 15000 06
07
08 E
08 E
10 E
11 E
Print/Animation/Gaming Industry: Projected Market Size - Print Media
Rs Cr
22000 19000 16000 13000 10000 06
07
08 E
08 E
10 E
11 E
Segments like print media, animation and gaming are also likely to see interesting growth rates. According to NASSCOM, the Indian gaming market is likely to grow 72 per cent from US$ 48.51 million in 2006 to US$ 429.54 million in 2010. Similarly, the Indian animation services industry is likely to grow at a CAGR of 25 per cent from US$ 354 million in 2006 to US$ 869 million in 2010. Current size (Print Media): Rs. 14,900 Crore; Projected size in 2012: Rs. 28,100 Crore Growth in 2007 over 2006 (Print Media): 16%; CAGR 200812: 14%
Indian Media & Entertainment Industry
Film Industry: The Indian film industry, with over 300 Crore admissions per annum, is the largest in the world, in terms of number of films produced per year. This industry, which was worth US$ 2.12 billion in 2006, is estimated to grow at a CAGR of 13 per cent to US$ 4.42 billion by 2011. One perceptible change has been the rapid growth of multiplexes, which meets consumer demand for quality entertainment and has also helped boost production of niche films targeted at niche audiences. Current size: Rs. 9,600 Crore; Projected size in 2012: Rs. 17,600 Crore Growth in 2007 over 2006: 14%; CAGR 2008-12: 13%
Projected Market Size - Film Industry 17000 Rs Cr
BMA Research Desk
14000 11000 8000 5000 06
07
08 E
08 E
10 E
11 E
Radio Industry:
Rs Cr
Projected Market Size - Radio
Radio regulator TRAI has recommended to Government for allowing news on radio and increasing the FDI limit amongst other provisions; these recommendations are expected to make radio more favorable with advertisers. Current size: Rs. 620 Crore; Projected size in 2012: Rs. 1800 Crore Growth in 2007 over 2006: 24%; CAGR 2008-12: 24%
1950 1700 1450 1200 950 700 450 200 06
07
08 E
08 E
10 E
11 E
Segment wise projected growth: Sectors Overall Television Filmed Entertainment Print Media Radio Music Animation, Gaming & VFX OOH advertising Online advertising
SIZE IN 2007 (RS. CR) 51300 22600 9600 14900 6200 7300 1300 1250 270
GROWTH 2007 over 2006 17% 18% 14% 16% 24% 1% 24% 25% 69%
SIZE IN 2012 (projected) (RS. CR) 115700 60000 17600 28100 1800 800 4000 2400 1100
CAGR 2008-12 18% 22% 13% 14% 24% 2% 25% 14% 32%
Source: FICCI PWC Report
Conclusion: March 08 is the best quarter for the media industry with the union budget being the key revenue driver. We expect media companies to register a 45.6% year-on-year (y-o-y) growth in revenues with TV18 and Zee News putting up a strong show. However the net profit growth on an overall basis is expected to be 28.4% with Zee News outperforming its peers. Consequently, other major companies like PVR, Deccan Chronical, HT Media yet to announce there results, which are expected to be positive. Other entertainment content areas like music and television also have a huge potential international market. Among the entertainment pack we found that fundamentally PVR, Deccan Chronicle, Balaji Telifilms and HT Media are at attractive level to accumulate on decline. These scripts are good investments for long term perspective. The business model of these companies is unique and banking on huge potential of media industry one can invest in these stocks.
Page
2
BMA Research Desk
Indian Media & Entertainment Industry
Brief Coverage – Accumulate
Deccan Chronicle Holdings Ltd (CMP: 145.10)
Week End Sensex Nifty Rating Target
Highlights:
May 16, 2008 17434.94 5157.70 Accumulate 204 (Long term)
Basic Stock Data Face Value (Rs) Share Outstanding (Cr) Latest P/E (x) Latest M-Cap (Cr) TTM EPS (Rs) Book Value Avg. Daily Volume Beta (4/06 – till date) 52 W H/L Bonus History Dividend (%) Dividend Yield (%)
2.00 24.49 12.05 3553.50 12.04 36.27 480466 0.8138 270/134 Nil 50.00 0.69
Deccan Chronicle Holdings Ltd, the publisher of popular English daily ‘Deccan Chronicle’ has been in the limelight after publishing its first business daily ‘Financial Chronicle’ in Hyderabad and Chennai market. We expect both sales and PAT to register a CAGR FY 07-11 of 34% and 37% respectively backed by positive industry outlook, raising advertising tariff across the board and geographical expansion. Based on discounted cash flow method, we have derived valuation of Rs. 204 per share for Deccan Chronicle, which is 40% higher than the current market price. A gradual accumulation can be considered in Deccan Chronicle Holdings Ltd at this level, with 12 months price target of Rs. 204. Investment Rationale:
Print on a roll in the south: The battle for the Rs 1,000-crore print media advertisement market in Chennai has just got hotter with the launch of the financial daily -- Financial Chronicle -- from the Deccan Chronicle group. The paper introduced former chairman of SEBI M. Damodaran as its ombudsman, a first for financial daily in India.
Shareholding Pattern
Promoter Foreign Institutions Public & Others
Joint venture: The Company had formed a joint venture company with Group M (a WPP company) to explore and create a market in the Sport and Event Management space through its wholly owned subsidiary Sieger Solution Ltd.
Revenue likely to go up: it has increases its advertising revenue by 30% with its immediate effect from last month. Revenue from new English daily is also expected although the print market is crowdie.
Strong fundamental: Turnover ratios like fixed assets turnover, Inventory turnover are well and above than industry average and better than other peer companies. Operating margin is very high and ROCE and RONW are larger than industry average.
Industry growth potential: According to FICCI-PWC report, new editions and forays into e-publishing are driving growth in print media. The sector is expected to grow at 14% CAGR to Rs. 28100 crore from Rs. 14900 crore in five yrs. Magazine publishing is expected record a 15% CAGR to 3800 crore, doubling from 1900 crore today.
60.88% 20.38% 13.14% 5.60%
Relative Performance
% Chg
195 155 115
DC
M ar 08
07 D ec
Se p
07
07 Ju n
Ap r0 7
75
Sensex
Financial Highlights:
Analyst Debjit Adak, [email protected] Chandan Ghosh, [email protected]
Rs Cr Sales Growth (%) PAT Growth (%) EPS OPM (%) RONW (%)
200703 552.78 67.06 161.36 137.78 6.61 52.84 28.19
200803E 817.32 47.86 293.38 81.81 12.22 59.45 27.63
200903E 1062.52 30 381.39 30 15.89 63.34 27.9
201003E 1281.27 20.59 459.91 20.59 19.16 65.12 26.51
201103E 1595.55 24.53 572.72 24.53 23.86 66.5 26.12
Page
3
BMA Research Desk
Indian Media & Entertainment Industry
Brief Coverage – Accumulate
PVR Ltd (CMP:190)
Week End Sensex Nifty Rating Target
Highlights:
May 16, 2008 17434.94 5157.70 Accumulate 356 (Long term)
Basic Stock Data Face Value (Rs) Share Outstanding (Cr) Latest P/E (x) Latest M-Cap (Cr) TTM EPS (Rs) Book Value Avg. Daily Volume Beta (4/06 – till date) 52 W H/L Bonus History Dividend (%) Dividend Yield (%)
10.00 2.30 21.25 437.19 8.94 78.39 21034 0.6084 376/160 Nil 10.00 0.53
Investment rationale:
Shareholding Pattern Promoter Foreign Institutions Public & Others
Enormous Expansion Plan: PVR will be investing Rs. 400 Crore over the next three years to set up 250 multiplexes across India. Out of 250, 40 will be PVR Prime, which is for high end viewers, where ticket price will be in the range of Rs. 300- Rs. 750 compared to the normal price of Rs. 120 – Rs. 150 per share.
Entered into production and distribution business: To operate a film distribution and production business through our 100% subsidiary, PVR Pictures, acquires and distributes Indian and international films. Its first Coproduction “Taare Zameen Par”, which was released during December 2007, has received good reviews and demonstrated strong box office performance.
Out of home entertainment (OOH): To ramp up its presence across retail entertainment landscape, PVR has entered into a JV with Major Cineplex Group, a leading Film exhibition and retail entertainment company based out of Thailand, to bring lifestyle entertainment concepts to Indian consumers. The Joint Venture would set-up bowling alleys, karaoke centers, ice skating rinks and gaming zones across the country to enhance the out of home entertainment experience for Indian consumers.
Strong performance: Add the latest initiative, which is the film production initiative, which is kicked off very well with Taare Zameen Par being doing very well. The food court initiative along with the Amit Burman, a very interesting business mix evolving. Operating margins to the north of 25% with return on capital employed on an individual project basis around 25% and just 12-times one-year forward earnings with a 60% top line visibility for the next two-years.
40.51% 31.33% 9.34% 18.82%
Relative Performance 250 % Chg
PVR Ltd, the premium multiplex company, is all set to become a media giant in line with big brothers like Adlabs and Pyramid saimira. The company will invest around Rs. 400 Crore in setting up 250 screens (at present it runs with 103 screens) over the period of three years. As per our estimation, both the sales and PAT to grow at a rate of 43% and 61% (CAGR FY 07-11) , backed by buoyancy in the multiplex sector, which has been growth at a rate of 40% during the last couple of years and company’s ambitions expansion plan. Based on discounted cash flow, we have derived a valuation of Rs. 356 per share for PVR, which is 89% higher than the current market price of Rs. 190. We recommended gradual accumulation of PVR in every decline with 18 month’s price target of Rs. 356.
200 150 100
08 M ar 08
ec D
07
07 Se p
Ju n
Ap r0 7
50
PVR
Sensex
Financial Highlights:
Analyst Debjit Adak, [email protected] Chandan Ghosh, [email protected]
Rs Cr Sales Growth (%) PAT Growth (%) EPS (Rs) OPM (%) RONW (%)
200703 164.72 54.46 11.06 92.76 3.95 17 5.42
200803E 251.27 52.54 24.32 119.92 9.73 22.96 8.83
200903E 351.78 40 36.25 49.04 14.5 23.38 12.29
201003E 492.49 38.45 52.63 45.19 21.05 23.14 17.8
201103E 689.48 35.67 75.87 44.15 30.35 22.91 21.29 Page
4
BMA Research Desk
Indian Media & Entertainment Industry
Brief Coverage – Accumulate
Balaji Telefilms Ltd (CMP: 174.65)
Week End Sensex Nifty Rating Target
Highlights:
May 16, 2008 17434.94 5157.70 Accumulate 257 (Long term)
Basic Stock Data Face Value (Rs) Share Outstanding (Cr) Latest P/E (x) Latest M-Cap (Cr) TTM EPS (Rs) Book Value Avg. Daily Volume Beta (4/06 – till date) 52 W H/L Bonus History Dividend (%) Dividend Yield (%)
2.00 6.52 13.01 1138.72 13.01 46.65 169811 0.3978 388/165 Nil 175.00 2.08
Balaji Telefilms Ltd (BTL) contents cater to a wide spectrum of audience through its diverse software which includes Sitcoms, Soaps, Game Show, Suspense and Thriller and children’s program in Hindi as well as regional languages. The company’s success in Television Software market is attributed to its early entry into the market. The company has set up state of art studio and postproduction facilities at all its centers. Backed by strong acceptance of its productions, upcoming serials, we expect top line and bottom line to grow at a rate of 15% and 22.5% respectively between 2007 to 2011 (CAGR). Based on DCF method, we have derived a valuation of Rs. 257 per share, which is 51% higher than the current market price of Rs. 174.65. We recommended gradual accumulation on Balaji Telefilms with 12 months price target of Rs. 257.
Investment rationale:
Strong business model: The Group's principal activity is production and distribution of motion pictures and feature films. The Group operates in two segments Commissioned Programmes, Sponsored Programmes and Feature Films. Commissioned Programmes include the sale of television serials to channels, Sponsored Programmes include the telecasting of television serials on channels and Feature films include production and distribution of films. It provides television, entertainment and other related services in India.
High TRP ratings: A high TRP rating to its productions is one of the positive aspects of the company. Success comes with its fare share of criticism. But for sheer intensity, nothing can rival the kind of barbs that have been regularly hurled at production house Balaji Telefilms and its creative director Ekta Kapoor, the chief chef of that unique concoction called the great Indian soap. Its new production “Kahaani Aurat kii” is about to hit in next few months.
JV with Star Group will pay in the future: Most recently company has entered into a Joint venture (51% Star and 49% Balaji) with Star Group to create a bouquet of regional language general entertainment channels, which initially targeting at the southern Indian market. Star will be responsible for operations of the channels, where as Balaji will produce regional language shows exclusively for the venture. We expect the venture will perform well in the future as both the parties have rich experience in their respective areas.
Shareholding Pattern Promoter Foreign Institutions Public & Others
40.00% 39.92% 11.61% 8.47%
Relative Performance
% Chg
400 300 200 100
M ar 08
07
07
Balaji
D ec
Se p
Ap r0 7 Ju n 07
0
Sensex
Financial Highlights:
Analyst Debjit Adak, [email protected] Chandan Ghosh, [email protected]
Rs Cr Sales growth(%) PAT growth(%) EPS (Rs) OPM(%) RONW(%)
200703 317.47 13.23 80.63 33.68 11.69 40.63 28.64
200803E 327.45 3.14 88.67 9.97 12.87 43.88 21.63
200903E 392.94 20 113.06 27.52 16.41 46 22.6
201003E 471.53 21.2 136.54 20.76 19.82 46 22.4
201103E 565.83 15.25 181.86 33.2 26.4 51 24.09 Page
5
BMA Research Desk
Indian Media & Entertainment Industry
Brief Coverage – Accumulate
HT Media Ltd (CMP: 140.15)
Week End Sensex Nifty Rating Target
Highlights: HT Media Ltd, promoted by Hindustan Times Ltd (a leading Newspaper publishing company) was incorporated on December 3, 2002. At present HTL holds 68.73% of shares of HT Media Ltd. HT Media is a major player in the print media in India. It has a leadership position in the English newspaper market in North India and the second position in the Hindi newspaper market in the North and East. Backed by rapid expansion plan in tier – II and tier III cities of Northern India, successful launching of business daily ‘Mint’ as well as capex plan of Rs. 200 crore to have 10 new printing locations; we have projected a top line and bottom line growth of 29% and 41% respective (CAGR 2007-2011). Based on discounted cash flow method, we have derived a valuation of Rs. 230 for HT media which is 61% higher than the current market price. A gradual accumulation can be considered at this level for long term investment purpose with 15 months price target of Rs. 230.
May 16, 2008 17434.94 5157.70 Accumulate 230 (Long term)
Basic Stock Data Face Value (Rs) Share Outstanding (Cr) Latest P/E (x) Latest M-Cap (Cr) TTM EPS (Rs) Book Value Avg. Daily Volume Beta (4/06 – till date) 52 W H/L Bonus History Dividend (%) Dividend Yield (%)
2.00 23.24 25.86 3282.31 5.42 33.47 39127 0.4792 266/128 Nil 15.00 0.21
Investment rationale:
Rapid Expansion Plan: Consolidating presence in existing businesses caused revenue growth of over 30% and into aggressive expansion of readership base. Successful new launches in Merrut/ Agra/ Kanpur and many other places in UP. The company has launched its Hindi daily “Hindustan” in Aligarh recently. Pan India presence is one of the main competitiveness of this organization.
Growth Strategy: There are many growth strategy adopted by HT Media are expand English franchise across metros, Enter new Hindi market, Extend Mint footprint, Continuing to invest in printing and infrastructure hub, complement print with internet/ magazines.
Diversification into e-business and FM radio space: Company’s’ subsidiary Firefly e-ventures has launched job portal www.shine.com, and we expect the venture to be successful as the portal will get back-up from its the versions Hindustan Times, Hindustan and Mint. Another social network site www.desimatri.com has been doing well and company has planned to launch other site in matrimonial, real estate and auto verticals. Fever FM, the radio JV with Virgin has been successfully running in Delhi, Kolkata, Mumbai and Bangalore and will be extending its footprint in other cities also.
Strong Fundamentals: Low Debt Company having enough growth potentials. High turnover ratio and high return on net worth give strong massage to its shareholders. Looking at strong last three quarter and attractive industry position one can invest for 1 yr down the line. Its ebusiness, radio businesses are also in growing phase.
Shareholding Pattern Promoter Foreign Institutions Public & Others
68.73% 17.96% 9.40% 3.91%
Relative Performance 210
%
160 110
07
M ar 08
HT Media
D ec
07 Se p
07 Ju n
Ap r0 7
60
Sensex
Financial Highlights:
Analyst Debjit Adak, [email protected] Chandan Ghosh, [email protected]
Rs Cr sales growth(%) PAT growth(%) EPS OPM(%) RONW(%)
200703 1039.3 26.17 118.71 208.72 4.95 22.18 15.15
200803E 1320.46 27.05 219.74 85.11 10.06 29.2 22.9
200903E 1716.6 30 273.09 24.28 12.5 27.71 23.18
201003E 2231.58 28.45 360.74 32.1 16.51 27.71 24.6
201103E 2901.05 25.67 475.72 31.88 21.77 27.71 25.75 Page
6
Valuation Using DCF Method: Deccan Chronicle Rs Cr sales other income expenses PBDIT Interest PBDT dep PBT tax PAT add: dep working cap cash from op. capex FCF PV Total PV terminal val total firm value share price (Rs)
0603 331 21 227 125 19 106 10 96 28 68 78 175 -97 41 -137
0703 553 32 295 291 33 257 17 240 79 161 178 290 -111 12 -124
0803E 817 49 327 539 76 464 32 431 138 293 326 305 21 14 7 7
0903E 1063 64 425 701 98 603 42 561 179 381 424 366 58 21 36 33
1003E 1281 77 513 846 118 727 51 676 216 460 511 403 108 32 77 64
1103E 1596 96 638 1053 147 906 63 842 270 573 636 463 173 47 126 97
1203E 1796 108 718 1185 166 1019 71 948 303 645 716 533 183 51 133 94 296 1623 1919 204
Disclaimer: This document is for private circulation only. Neither the information nor any opinion expressed constitutes an offer, or any invitation to make an offer, to buy or sell any securities or any options, future or other derivatives related to such securities. BMA Wealth Creators Pvt. Ltd. Or any of its associates or employees doesn’t except any liability whatsoever direct or indirect that may arise from the use of the information herein. BMA Wealth Creators (P) Ltd. And its affiliates may trade for there own accounts as market maker, block positional, specialist and/or arbitrageur in any securities of this issuer (s) or in related investments, may be on the opposite side of public orders. BMA Wealth Creators (P) Ltd. and its affiliates, directors, officers, employees, employee benefit programs may have a long or short position in any securities of this issuer (s) or in related investments no matter content herein may be reproduced without prior concert of BMA. While there report has been prepared on the basis of published/other publicly available information considered reliable, we are unable to accept any liability for the accuracy of its contents.
PVR Rs Cr sales other income expenses PBDIT Interest PBDT dep PBT tax PAT add: dep working cap cash from op. capex FCF PV Total PV terminal val total firm value share price (Rs)
0603 103 3 87 19 3 16 7 9 3 6 13 73 -60 58 -118
0703 165 7 139 33 6 28 12 15 4 11 23 -43 66 18 48
0803E 251 9 203 58 6 52 16 36 11 24 40 6 35 14 21 21
0903E 352 12 281 82 10 72 19 53 17 36 55 7 49 21 28 25
1003E 492 15 394 114 14 100 23 77 25 53 76 7 68 32 37 31
1103E 689 20 552 158 19 139 27 112 36 76 103 8 95 47 48 37
1203E 864 26 691 199 24 175 33 142 45 97 130 10 120 51 69 49 163 703 866 356
BMA Wealth Creators Pvt. Ltd Corporate Office: INFINITY, Think Tank -1, 3rd Floor, Plot No. - 43; Block – GP, Sector V, Salt Lake; Kolkata - 700091 Telephone: +91-33-40110099, Fax - +91-33-23675230 Website: www.wealth-creators.in
Valuation Using DCF Method: Balaji Telefilm Rs Cr sales other income expenses PBDIT Interest PBDT dep PBT tax PAT add: dep working cap cash from op. capex FCF PV Total PV terminal val total firm value share price (Rs)
HT Media 0603 280 9 187 102 0 102 14 88 29 59 73 -17 90 5 85
0703 317 13 201 129 0 129 11 118 37 81 92 35 57 4 53
0803E 327 21 204 144 0 144 13 130 42 89 102 30 72 5 67 67
0903E 393 24 236 181 1 180 13 166 53 113 127 36 90 8 83 76
1003E 472 28 283 217 1 216 15 201 64 137 152 40 112 11 100 85
1103E 566 34 311 289 1 288 20 267 86 182 202 46 156 17 139 107
1203E 679 41 373 346 1 345 24 321 103 218 243 53 190 25 164 116 451 1746 1746 257
Rs Cr sales other income expenses PBDIT Interest PBDT dep PBT tax PAT add: dep working cap cash from op. capex FCF PV Total PV terminal val total firm value share price (Rs)
0603 824 18 728 113 14 100 39 61 20 41 80 327 -248 4 -251
0703 1039 40 849 230 14 216 40 177 58 119 158 -239 398 19 379
0803E 1320 36 971 386 18 368 45 323 103 220 265 36 229 21 209 21
0903E 1717 47 1287 476 20 456 54 402 129 273 327 43 284 31 254 233
1003E 2232 61 1674 618 23 595 65 530 170 361 425 47 379 46 332 280
1103E 2901 79 2176 804 27 777 78 700 224 476 553 54 500 69 430 332
1203E 3481 102 2611 973 31 942 93 849 272 577 670 62 608 51 558 395 1261 4391 5652 230
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