Weak quarter for broadcasters; multiplexes to witness recovery!

For broadcasters, Q3 will be a weak quarter on the ad front given the weak ad spending by FMCG as well as key sporting events garnering higher ad share. For multiplexes, a relatively decent November and December box office collection is expected to drive a footfall and profitability recovery.

Multiplex: Decent box office to aid recovery!
Q3 was a decent quarter with a box office recovery aided by movies such as Avatar 2, Drishyam 2 and Kantara. Thus, multiplexes are expected to witness ~35-40% QoQ growth in box office revenues with a footfall recovery (up 22-30% QoQ) and average ticket price (ATP) growth at ~7% QoQ for Inox and PVR. PVR, relatively will witness less QoQ growth of ~22% QoQ in footfall as its Q2 base was better. Advertisement remains at ~60-64% of pre-Covid for Inox, PVR, respectively. We expect both PVR and Inox to witness a recovery in profitability with 14% and 13%, ex-Ind AS
margins vs. losses in Q2. With a decent content line-up ahead, we expect box office collection momentum to remain healthy.

Broadcasters: Weak performance likely on ad front!
During Q3FY23, GEC broadcasters are expected to witness a weak quarter with YoY ad decline owing to a) exit of free to air channel by Zee; b) weak ad spending by FMCG as well as key sporting events such as T20 World Cup, Football World Cup etc. garnering higher ad share. Sun TV’s ad revenues is likely to see a decline of 5% YoY, given weak ad spends. Subscription revenues are expected to be muted (down 3% YoY) amid NTO 2 implementation led pricing restrictions. We expect EBITDA margins at 66.5%, down 350 bps YoY, due to weak revenues performance.

Bottomline may decline ~14% YoY to | 395 crore. Zee’s ad revenue is expected to witness ~11% YoY decline owing to loss of ad revenues as it pulled out its GEC channels from free dish and weak ad spending. Reported subscription growth is expected to be modest at ~4% YoY. We expect margins at 16%, down 670 bps YoY, given the higher content costs and weak topline show, albeit better QoQ. For TV Today, we expect ~2% YoY decline in TV and digital revenues, with growth in the digital segment (low double digit YoY) and TV segment witnessing a decline amid lower ad spends. EBITDA margins at 22% are expected to be down ~11 percentage points YoY, with higher production costs and lower revenues.

Going ahead, TV ad recovery would hinge on resumption of ad spends by FMCG players. An ad recovery would also be key in margin improvement for broadcasters, going ahead. ICICI Securities