Media Q1FY22 preview: Ad revenue to dip on second wave of covid

Second wave of covid, fewer hours of fresh content and weakness in viewership share. Besides,programming costs may rise for ZEEL on rise in production cost on out-door shoots and movie investment. Sun TV may see a marginal dip. Multiplexes revenue will suffer from closure of screens. Multiplexes received rental waivers and concessions in FY21 and we need to see if they can re-negotiate the same.

Key points to watch out: 1) ZEEL – company’s efforts to improve rating across GEC, performance of ZEE5 and investment in movie business; 2) Sun TV – efforts to bounce back on TV viewership, plans for SunNXT, progress on investment in movies, dividend and buyback policy; and 3) multiplexes – cost control and progress on rental re-negotiation and cash availability.

• Pain in ad revenues continue. We expect second wave of covid and lockdown in Q1FY22 to impact ad revenues for media industry, and decline by 25-26% QoQ for ZEEL and Sun TV. Further, ZEEL would be impacted from significant drop in viewership share in Hindi Primetime GEC and other languages as well which is disappointing. Though Sun TV has seen improvement in its viewership share in Tamil all-day GEC, but we believe it could be due to lack of content for peers, and at the end of Q1FY22, it fell again. Thus, we do not see Sun TV benefitting from improvement in viewership share; other regional GECs continue to remain weak.

• ZEEL’s consolidated EBITDA likely to dip 41% QoQ to Rs3.2bn; however, it would report 46% YoY rise on low base. We are building 25% QoQ dip in ad revenue to Rs8.4bn in Q1FY22; subscription revenue to rise 2.8% QoQ to Rs8bn (partly benefitting from ‘Radhe’ movie release). Total revenue to dip 13% QoQ, but up 31% YoY to Rs17bn. Programming cost to rise despite dip in programming hours due to out-door shoots and addition of content for ZEE5 (including rights cost for ‘Radhe’). Other costs will dip by 13% QoQ. ZEEL’s net profit to decline 40% QoQ to Rs1.7bn.

• Sun TV’s standalone EBITDA to dip 7.4% QoQ to Rs5bn; up 22% YoY. Sun TV’s ad revenues to dip 26% YoY to Rs2.4bn and subscription revenues to grow 4% QoQ to Rs4.5bn. We are also factoring in Rs1.2bn revenue from IPL. We are factoring in lower programming cost on fewer fresh programming hours. EBITDA to decline 7% QoQ, and dip is restricted from IPL profit contribution. Net profit down 22% QoQ to Rs3.5bn and lower amortisation cost continues on lower investment in movies.

• PVR and INOX – no material revenue; focus on costs. Considering very little content for exhibitors and closure for most screens, we see no material revenue for PVR and INOX in Q1FY22. However, the key to watch out would be cash burn and cost control, particularly progress on rental waiver / concession during lockdown period and thereafter. The cash position for both PVR and INOX will be comfortable for the next few months, but higher payments towards rental could potentially reduce availability. The other key thing to watch out is movie pipeline which has been reducing due to direct launch on OTT platform. BCS Bureau