Q4 Earnings preview of media sector – Multiplexes on recovery path!

Media sector is expected to witness a different growth trajectory across segments. For broadcasters, muted ad spends by key category of FMCG/Consumers amid input price pressures, will impact ads for GECs while news segment will witness healthy growth led by state elections tailwinds and global news heavy quarter. For multiplexes, despite a complete washout for the first one and half months, strong box office collections of movies like Kashmir Files, RRR, Gangubai Kathiawadi, etc, will result in a relatively resilient performance.

Multiplexes: March box office rescues after washout first half
Q4 started on a dismal note with no major releases in the first half of the quarter. However, the box office staged a strong recovery from end of February with Kashmir Files, RRR, Gangubai Kathiawadi, etc, driving growth. Inox Leisure is likely to report superior footfall growth as it had capitalised on the sleeper hit “Kashmir Files” through higher screen allocation from the beginning.

In terms of Q4 performance, we expect footfalls at ~11.5 mn and ~14 mn for Inox and PVR, respectively, up ~22% QoQ, down ~3% QoQ, respectively. Ad revenues are expected to be much lower at 30-35% of pre- Covid levels. We expect spends per head (SPH) for multiplexes to remain healthy with Inox and PVR expected to report SPH of | 88, | 120, respectively. We estimate EBITDA loss (ex-Ind-AS) of | 23 crore for PVR while we bake in EBITDA (ex-Ind-AS) of | 30 crore for Inox (~9% margins). PVR EBITDA losses are likely owing to muted footfalls and higher cost structure. We also highlight with only marginal rental waivers during Q4, we expect both PVR and Inox to revert back to 90%+ rentals levels of pre- Covid during the quarter.

Broadcasters: News segment to report better performance…
Q4FY22 is expected to reflect a divergent performance among broadcasters with news segment doing well with state election tailwinds and global news heavy quarter while GECs ad growth may be modest owing to muted spends by FMCG companies amid inflationary pressures.

Sun TV’s ad revenues are likely to witness growth of 8% YoY, with growth moderation largely owing to muted spends by FMCG companies, in a high input prices scenario. Subscription revenues are expected to be muted (up 1% YoY) amid NTO 2 implementation. We expect EBITDA margins (ex- IPL) at 69%, down 90 bps YoY, due to higher content cost.

For TV Today, we expect ~15% YoY growth in TV revenues driven by state elections tailwinds and 25% YoY growth in digital revenues. EBITDA margins at 30% are expected to be up 680 bps YoY, as base quarter had certain one-off production costs. ICICI Direct