Media Q2 results: Box office booms, broadcasters struggle

Media:
As eight movies have breached Rs 1 billion mark, industry wide box office collections stood at record levels of ~Rs 32.7 billion in Q2 FY24E. Accordingly, we expect PVR-Inox Ltd. to report standout performance with footfalls of 47 million (~30% occupancy) and pre-Indian accounting standard Ebitda margin of 19.2%.

On broadcasting side, while Zee Entertainment Enterprises Ltd.’s performance is likely to be impacted by continued weakness in ad environment, windfall from Gadar-2 (co-produced by Zee Studios) should aid performance in Q2 FY24E.

We expect domestic ad-revenues to decline 2.5% YoY to Rs 9.3 billion with an Ebitda margin of 11.1% (back in double digit after two quarters).

Entertainment: While Nazara Technologies Ltd.’s top-line growth of 19.3% YoY will be aided by consolidation of WildWorks (base quarter had consolidation impact of one month) and healthy growth in Nodwin, Ebitda margin is likely to be at 8.3%.

We believe Nazara is on a strong growth path as recent fund infusion of ~Rs 5.1 billion can help the business expand inorganically, while return of BGMI is a big positive for Esports viewership.

Top pick:
Though Nazara has remained our preferred pick in the media and entertainment space for quite some time given 50% plus appreciation in last 6 months, we switch to Zee Entertainment as it has a better risk-reward at current levels given merger overhang is now over. BQ Prime