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TM Angel Broking Jain Irrigation Service Truly Personalized TV Today Network Initiating Coverage BUY 'T’rue ‘V’alue Today TV Today Network (TVTN), a focused News broadcaster with a strong bouquet of four Price Rs91 news channels, has maintained its leadership in the News Genre over seven consecutive Target Price Rs117 years. Revamped Headlines Today, merger of Radio Today, flow of subscription Revenues Investment Period 12 Months and new channel launches would be the key drivers affecting the TVTN stock performance in the ensuing quarters. At the CMP of Rs91, TVTN is trading at attractive valuations of Stock Info 8.5x FY2010E Earnings making it the cheapest stock in the Broadcasting space. Moreover, we believe the company's recent buyback announcement would lend downside Sector Media-Broadcasting support to the stock. We Initiate Coverage on the stock, with a Buy recommendation Market Cap (Rs cr) 526 and Target Price of Rs117. Beta 0.8 News Genre gaining ground: News genre viewership has witnessed exponential 52 Week High / Low 200/73 growth from 2.5% to 8.1% during FY2002-08 largely owing to channel explosion and shift in Avg Daily Volume 68,344 content focus. Advertisers have also upped the spend on this genre owing to rising viewership base of news channels. Thus, although the News genre contributed 8% to the total Face Value (Rs) 5 television viewership pie in FY2008, it accounted for 12-13% of the total television advertising pie. We also expect Hindi news to dominate the News Ad pie with Aaj Tak BSE Sensex 14,001 contributing 25-30% of the Hindi News Ad pie. Nifty 4,228 Strong Brand Franchise: TVTN continues to be India's number one news broadcaster with 22.2% network share owing to sustained leadership of its flagship BSE Code 532515 channel - Aaj Tak. Further, Tez channel has only helped the network cement its leadership position. Post revamp, Headlines Today has also seen a re-rating in its viewership and we NSE Code TVTODAY expect Revenues to follow hereon. Reuters Code TVTO.BO Pay Revenues & Radio Merger - 'The much required boost': After having Bloomberg Code TVTN IN established itself in the international market, TVTN has recently tapped the domestic subscription market. All its channels except Dilli Aaj Tak, went pay in November 2007. Shareholding Pattern (%) Since, subscription Revenue does not entail significant incremental costs, we expect it to directly lend a boost to Bottom-line. Further, merger of the Radio arm into TVTN, we Promoters 55.7 believe, will address the scalability issue and bring in synergistic benefits in terms of MF / Banks / Indian FIs 25.6 garnering local advertising. FII / NRIs / OCBs 0.2 Key Financials Indian Public / Others 18.5 Y/E March (Rs cr) FY2007 FY2008 FY2009E FY2010E Net Sales 188.9 231.0 280.5 331.6 Abs. 3 m 1yr 3yr % chg 18.4 22.3 21.4 18.2 Sensex (%) (7.8) (10.3) 70.9 Net Profits 31.1 43.5 51.0 61.8 TV Today(%) (2.2) (40.4) (15.3) % chg 12.0 40.0 17.2 21.1 OPM (%) 27.5 27.0 26.7 27.7 Anand Shah EPS (Rs) 5.4 7.5 8.8 10.7 Tel: 022 - 4040 3800 Ext: 334 P/E (x) 17.0 12.1 10.3 8.5 E-mail: [email protected] P/BV (x) 2.1 1.8 1.6 1.4 RoE (%) 12.2 14.9 15.3 16.0 Shweta Boob RoCE (%) 13.2 15.5 16.7 18.3 Tel: 022 - 4040 3800 Ext: 311 EV/Sales (x) 2.1 1.7 1.3 1.0 E-mail: [email protected] EV/EBITDA (x) 7.6 6.1 5.0 3.8 Source: Company, Angel Research JanuarySeptember 30, 200812, 2008 For For Private Private Circulation Circulation Only Only - -Sebi Sebi Registration Registration NoNo :: INB 010996539 1 Angel BrokingTM TV Today Network Service Truly Personalized Media-Broadcasting Company Background TV Today Network (TVTN) is India's leading News broadcasting company. A Living Media Group company (flagship company of India Today Group promoted by Aroon Purie), TVTN was established in 1988 as a media content provider. In 1995, TVTN commenced with the broadcast of Aaj Tak on Doordarshan as a 20min Hindi news and current affairs programme, which speedily gained popularity. Consequentially, in 1999, TVTN was incorporated with the group's mission of exploring the television medium. Exhibit 1: Business Model Source: Company, Angel Research TVTN continues to remain India's number one News broadcaster with 22.2% network share owing to sustained leadership of its flagship channel - Aaj Tak which has successfully battled the onslaught of a large number of new players in the Hindi News space. Tez, the Hindi flanking brand for Aaj Tak, has helped the network cement its leadership position in the Hindi News genre. Headlines Today, its English News channel, was recently revamped, which boosted the channel's viewership share to 10-11% in FY2008. After establishing a strong hold in the national news space, TVTN has also forayed into regional news through Dilli Aaj Tak, a Metro-centric 24-hour Hindi news channel. Dilli Aaj Tak targets viewers in Delhi and the NCR region. In its attempt to reduce dependence on advertising as well as to cash in on subscription revenues, TVTN has made significant inroads in the International market by distributing Aaj Tak and Headlines today in the Middle East, US (through Echostar Dish Network), UK and Continental Europe (through Globecast World TV). On the domestic front, all TVTN channels (except Dilli Aaj Tak) recently went pay in November 2007 in the non-CAS areas. For distribution of its pay channels, TVTN has entered into a strategic tie up with the One Alliance group. Radio Today Merger - TVTN has decided to merge its fellow subsidiary Radio Today with itself. Radio Today launched India's first talk-based, women-centric radio station under the banner of Meow 104.8 FM. Meow follows a unique "less music, more talk" format. TVTN is still awaiting approvals from Information & Broadcasting (I&B) Ministry for the merger. SeptemberJanuary 30, 12,2008 2008 For For Private Private Circulation Circulation Only Only - -Sebi Sebi Registration Registration No No :: INBINB 010996539 2 Angel BrokingTM TV Today Network Service Truly Personalized Media-Broadcasting Investment Argument News Genre - 'Gaining Ground' News Genre viewership has Over the last several years, News has emerged as one of the fastest growing genres with its grown exponentially from viewership share growing exponentially from 2.5% to 8.1% over FY2002-08. In absolute 2.5% to 8.1% over FY2002-08 numbers, the average weekly reach of news genre during the period grew from 18mn to 86mn. While rising literacy levels and buoyant economy are the key macro factors aiding this growth, we believe entry of new players in the space coupled with a shift in content focus has helped expand the overall viewership of the News genre. Exhibit 2: News Genre - Reach and Viewership 100 9.0 8.1 7.7 90 8.0 6.7 80 7.0 70 5.3 6.0 60 5.0 50 (%) (mn) 3.7 86 4.0 40 3.1 2.5 3.0 30 54 48 50 20 2.0 27 30 10 18 1.0 - - FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 Reach (LHS) Viewership Share (RHS) Source: TAM India, Company, Angel Research 'Channel Explosion' - The Key driver 44 news channels beam Low entry cost (Rs50-60cr to start a news channel), growing share of the Television advertising across 70mn C&S pie and an easy definition to be qualified as a news channel has driven a large number of households channel launches in the News genre. Moreover, growth of news channels has happened alongside the growth in the number of Cable & Satellite (C&S) homes. During 1998-2002, 8-11 news channels beamed across 20-30mn households, which has risen to 44 news channels (including regional news channels) across 70mn C&S households today. In terms of national channels, currently there are around 25 news channels including 13 Hindi, 7 English and 5 business news channels. Leading the pack in Hindi news channels are Aaj Tak, India TV, Star News, Zee News, IBN7 and NDTV India. Among the English news channels, NDTV 24x7, Times Now, Headlines Today and CNN-IBN top the popularity charts while the Business news space is dominated by CNBC TV18 and NDTV Profit. We believe while the growing number of channel launches is bound to increase fragmentation in news viewership, it has helped attract a completely new set of viewers and expand the overall base through niche models (city-centric and regional news channels) and fresh content (lifestyle, sports and entertainment). JanuarySeptember 30, 200812, 2008 For For Private Private Circulation Circulation Only Only - -Sebi Sebi Registration Registration NoNo :: INB 010996539 3 Angel BrokingTM TV Today Network Service Truly Personalized Media-Broadcasting Exhibit 3: National News Channels in India 30 25 5 20 4 7 15 4 6 10 4 13 1 5 9 3 6 2 0 FY 2003 FY 2005 FY 2007 FY 2009E Business English Hindi Source: Company, Angel Research Shift in Content focus - 'No more Simply News' News channels have To combat rising competition and garner higher viewership from other genres, News channels transformed into a wholesome have undergone a complete makeover from being traditional News providers to dishing out a infotainment provider wholesome infotainment package. TV news today is no longer political news dominated. Sports (cricket), entertainment and crime stories have also become an integral part of the news bulletins.