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.
|SALES (₹ Crs)||312.70||389.40||475.70||519.30|
|NET PROFIT (₹ Cr)||12.20||61.30||97.80||119.00|