Mumbai: TV Today Network’s (TVTN) Q3 revenue rose 13.6 per cent YoY and 22.8 per cent QoQ to Rs 2,627mn versus our estimates of Rs 2,412mn. Revenue for TV and digital segments was Rs 2,040mn and Rs 540mn, respectively. EBITDA margin was 15.7 per cent, up 7bps YoY and 1,012bps QoQ. PAT grew 5.4 per cent YoY to Rs 291mn, due to high revenue growth and an increase in EBITDA.
TVTN reported strong TV revenue growth of 12.1 per cent YoY on a low base (in Q3FY23, TV revenue declined 8 per cent YoY), led by increased revenue from events, growth in pricing and brand solutions revenue. We believe the momentum in TV revenue growth may improve in the next two quarters because of the positive impact of the general elections. We estimate revenue from the TV segment to post a healthy growth of 15 per cent YoY in H2FY24E and 7 per cent in FY25E. Profitability has also improved in the TV segment because of better revenue growth, higher realisation, and cost-cutting initiatives.
Digital segment revenue grew 15 per cent YoY, but growth was subdued versus the historical average of 32 per cent YoY (FY19- 22) due to higher dependence on third-party platforms for revenue, which remains volatile. We believe on a steady-state basis, revenue from the digital segment could see a CAGR of 19 per cent in FY24E-26E. Investments in digital have largely peaked out, hence, lower investments in digital going forward may also improve profitability. Expect EBITDA margin to improve 900bps in FY24E-26E, led by 1) operating efficiencies, 2) better growth in the TV segment and 3) lower losses in digital
We believe TVTN is a play on elections and may see momentum in the next two quarters, but going ahead as well, TV as a genre could sustain and post growth in line with industry average as it is consumed live. Scale on digital may be a key monitorable but dependence on third-party may lead to growth being volatile, as global giants have posted muted growth in India in terms of digital advertising.
Valuation: The stock moved up 12.4 per cent in the past six months. We slightly up our revenue estimates 1.2 per cent and 1.4 per cent (on better TV revenue growth) and earnings estimate 10.5 per cent and 9.8 per cent (on better margins going forward) for FY25E and FY26E. We retain Buy and roll over to March 2025E TP. We up our SoTP-TP to Rs 300 from Rs 260 (on roll-over). The core broadcasting business is currently trading at 5.3x one-year forward P/E (ex of healthy cash balance of Rs 4.5 bn). We assign a 10x one-year forward P/E to the core broadcasting business and value cash (Rs 4.5 bn) and the digital business (at 2x one-year forward Mcap-to-sales) separately.
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