Initiating Coverage | Media August 4, 2016 TV Today Network BUY CMP `297 Go with the market leader Target Price `363 TV Today Network (TTNL) is one of India's leading Hindi-English news television Investment Period 12 Months networks. The company's operating segments include television broadcasting and radio broadcasting. The company operates four news channels, which include Aaj Tak, India Today (earlier know as Headlines Today), Tez and Dilli Aaj Tak. It is also engaged in Stock Info publishing; its publications include India Today, Business Today etc. The company has Sector Media hired well know anchors like Karan thapar and Rajdeep Sardesai in its team. Market Cap (` cr) 1,787 Strong viewership ranking in Hindi and English news genre: TTNL enjoys a strong Net Debt (` cr) (201) viewership ranking in the Hindi and English news channel categories. The company’s Beta 1.3 Hindi news channel – Aaj Tak has maintained its market leadership position occupying the No.1 rank for several consecutive years in terms of viewership and continues to 52 Week High / Low 351/186 dominate by being the channel of choice during unfolding of key national as well as Avg. Daily Volume 12,948 international events. Further, TTNL’s English news channel - India Today has been Face Value (`)5 continuously gaining viewership ranking; it has now captured No. 2 ranking from No. 4 BSE Sensex 27,714 earlier. Its other channels like Dilli Aaj Tak and Tez are also popular among viewers. Nifty 8,551 TTNL to benefit from TV industry (ad + subscription revenue) growth of ~16% CAGR Reuters Code TVTO.BO over CY14-19E: Going forward we expect TV industry to report a 16% CAGR over CY2014-19E on back of increased advertisement allocations by corporates, Bloomberg Code TVTN.IN government and E-Commerce set ups, which are a significant new category. We also expect an improvement in subscription revenue due to digitization of phase 3 & 4. Since Shareholding Pattern (%) the last 6-7 quarters, FMCG and automobile companies (incur significantly high ad Promoters 57.4 spends) are underperforming due to weak consumer buying sentiments in rural areas MF / Banks / Indian Fls 6.8 which is owing to two prior consecutive years of poor monsoon. However, we are now seeing some improvement in TV ad spends by these companies given the in-line current FII / NRIs / OCBs 7.8 year monsoons. On this account TTNL will stand to benefit. Indian Public / Others 28.0 Complete exit from Radio business to improve profitability: TTNL had 7radio stations which were continuously incurring losses year after year (in FY2016, the Radio business Abs.(%) 3m 1yr 3yr accrued an EBIT level loss of `13.5cr). Out of the 7 radio stations, TTNL has sold off 4 Sensex 9.8 (1.7) 44.4 (Jodhpur, Amritsar, Patiala and Shimla) for `4cr. The remaining 3 stations are in the TTNL (5.6) 37.3 352.7 process of getting sold off to ENIL but the sale will have to wait until concerns raised by the MIB are resolved. Going forward, we expect them to be sold off and this would prop up the company’s profitability. 3-year price chart Outlook and Valuation: We expect TTNL to report a net revenue CAGR of ~16% 400 to ~`743cr and net profit CAGR of ~16% to `128cr over FY2016-18E. The 350 company has sustained its leadership position in Hindi news genre for14 300 consecutive years while in the English news genre it currently holds the No.2 250 position. Further, the exit from the radio business should boost profitability. The 200 company is debt free with `201cr of cash on its balance sheet. At the current 150 market price of `297, the stock trades at a PE of 16.2x and 13.9x its FY2017E 100 and FY2018E EPS of `18.4 and `21.4, respectively. We initiate coverage on the 50 stock with a Buy recommendation and target price of `363 based on 17x 0 FY2018E EPS, indicating an upside of ~22% from the current levels. Jul-14 Jul-15 Jul-16 Jan-15 Jan-16 Apr-15 Apr-16 Oct-14 Oct-15 Feb-14 Aug-13 Nov-13 May-14 Key financials Y/E March (` cr) FY2015 FY2016 FY2017E FY2018E Source: Company, Angel Research Net sales 477 546 637 743 % chg 22.4 14.6 16.6 16.8 Net profit 81 94 110 128 % chg 32.1 16.4 16.3 16.3 EBITDA margin (%) 27.6 26.8 27.5 27.5 EPS (`) 13.6 15.8 18.4 21.4 P/E (x) 21.9 18.8 16.2 13.9 P/BV (x) 3.9 3.3 2.8 2.4 RoE (%) 18.0 17.7 17.4 17.2 RoCE (%) 22.3 21.7 22.5 22.7 Amarjeet S Maurya EV/Sales (x) 3.4 2.9 2.4 1.9 022-39357800 Ext: 6831 EV/EBITDA (x) 12.4 10.7 8.7 7.1 [email protected] Source: Company, Angel Research, Note: CMP as of August 4, 2016 Please refer to important disclosures at the end of this report 1 TV Today Network | Initiating Coverage Key investment arguments Strong viewership ranking in Hindi and English news genre TTNL enjoys a strong viewership ranking in the Hindi and English news channel categories. The company’s Hindi news channel – Aaj Tak has maintained its market leadership position occupying the No.1 rank for several consecutive years in terms of viewership and continues to dominate by being the channel of choice during unfolding of key national as well as international events. Further, TTNL’s English news channel - India Today has been continuously gaining viewership ranking; it has now captured No. 2 ranking from No. 4 earlier. Its other channels like Dilli Aaj Tak and Tez are also popular among viewers. Exhibit 1: BARC Viewership ratings of top 5 Hindi news Exhibit 2: BARC Viewership ratings of top 5 English channels news channels 90000 300 78,572 80000 74,606 243 250 70000 200 60000 53,592 52,640 49,121 50000 150 131 127 40000 100 83 30000 66 20000 50 Weekly Impressions (000s) sum (000s) Impressions Weekly Weekly Impressions (000s) sum (000s) Impressions Weekly 10000 0 0 Times Now India Today CNN News18 NDTV 24x7 News X Aaj Tak India TV India News ABP News News Nation Television Source: BARC India, Angel Research Note : rating between Saturday,16th Source: BARC India, Angel Research Note : rating between Saturday,16th July 2016 to Friday, 22nd July 2016 July 2016 to Friday, 22nd July 2016 TTNL to benefit from TV industry growth of ~16% CAGR over CY14-19E. Going forward we expect TV industry to report a 16% CAGR over CY2014-19E on back of increased advertisement allocations by corporates, government and E- Commerce set ups, which are a significant new category. We also expect an improvement in subscription revenue due to digitization of phase 3 & 4. Since the last 6-7 quarters, FMCG and automobile companies (incur significantly high ad spends) are underperforming due to weak consumer buying sentiments in rural areas which is owing to two prior consecutive years of poor monsoon. However, we are now seeing some improvement in TV ad spends by these companies given the in-line current year monsoons. On this account TTNL will stand to benefit. August 4, 2016 2 TV Today Network | Initiating Coverage Exhibit 3: TV industry market size Exhibit 4: Ad share by genre 1200 2.8% 2.0% 1.4% Hindi GECs 3.0% 3.0% 1000 Regional GECs 3.8% 800 Hindi News 4.3% 27.5% Regional News bn) 600 676 ` ( 5.0% 595 Others 400 513 6.7% 433 369 Hindi Movie 320 15.9% 281 200 245 7.9% 213 187 English News 165 158 299 260 226 198 175 155 8.3% 88 136 82 125 116 0 103 8.4% Sport Kids CY08 CY09 CY10 CY11 CY12 CY13 CY14 CY15P CY16P CY17P CY18P CY19P Source: FICCI KPMG, Angel Research Source: FICCI KPMG, Angel Research Complete exit from Radio business to improve profitability TTNL had 7radio stations which were continuously incurring losses year after year (in FY2016, the Radio business accrued an EBIT level loss of `13.5cr). Out of the 7 radio stations, TTNL has sold off 4 (Jodhpur, Amritsar, Patiala and Shimla) for `4cr. The remaining 3 stations are in the process of getting sold off to ENIL but the sale will have to wait until concerns raised by the MIB are resolved. Going forward, we expect them to be sold off and this would prop up the company’s profitability. Exhibit 5: Historical Radio business financial performance FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 Revenue 4.4 4.2 8.1 10.0 15.4 15.5 9.0 EBIT (22.1) (21.9) (18.6) (13.2) (11.2) (9.3) (13.5) Source: Company, Angel Research August 4, 2016 3 TV Today Network | Initiating Coverage Outlook and Valuation We expect TTNL to report a net revenue CAGR of ~16% to ~`743cr and net profit CAGR of ~16% to `128cr over FY2016-18E. The company has sustained its leadership position in Hindi news genre for14 consecutive years while in the English news genre it currently holds the No.2 position. Further, the exit from the radio business should boost profitability. The company is debt free with `201cr of cash on its balance sheet. At the current market price of `297, the stock trades at a PE of 16.2x and 13.9x its FY2017E and FY2018E EPS of `18.4 and `21.4, respectively.