Last Updated – Sept 2022
In this article, we will cover
- All About Media Stocks
- Summary Table of Best Media Stocks to Buy
- Detailed Overview of Best Media Stocks
- Risks to consider before investing in Best Media stocks
- Watch this video on how you can select the Best Media Stocks
- Model Portfolio of Best Media Stocks
- A detailed table with various parameters for Best Media Stocks to buy
All About Media Stocks
The media and entertainment industry in India consists of many different segments such as television, print, and films. It also includes smaller segments like radio, music, out-of-home advertising, animation, gaming and visual effects and the industry presents a huge range of opportunities to grow across different segments. India has one of the most diverse media industries, with over 850 TV channels and 17,000 newspapers. With a population of 130 crore, household television penetration of 89%, internet subscriber base of 72.3 crore and nearly 40 crore smartphone users, India’s telecom industry is set to become the primary platform for content distribution and consumption. The fast-growing mobile environment in India is helping the media and entertainment companies to reach a much larger market.
Traditionally media companies relied on distributors or resellers to reach their end consumers. In a digitalized world every media segment can directly connect with the consumer and stronger the direct relationship, the better the engagement and monetization. Hence greater value is attributed to D2C relationships and D2C has emerged as the new metric to evaluate a media company. D2C is not merely visitors on a web page or number of app downloads but is defined as that set of customers for whom the company has depth of data and can be uniquely presented to the advertiser / sponsor. Emerging opportunities in India in wireless broadband connectivity and infrastructure coupled with favourable economic growth and young demographics are expected to present new growth prospects to the industry.
Summary Table of Best Media Stocks to Buy
|Sr. No||Company Name||BSE Scrip Code||NSE Symbol||CMP – Sept 2022||Rating||Industry|
|1||Zee Entertainment Enterprises||505537||ZEEL||270.75||1||M&E- TV Broadcasting|
|2||Sun TV Network||532733||SUNTV||455.3||4||M&E- TV Broadcasting|
|3||PVR Ltd||532689||PVR||1,765.10||0.5||M&E- Film Exhibition|
|4||Network 18 Media & investment||532798||NETWORK18||69.75||0.5||M&E- TV Broadcasting|
|5||Inox leisure||532706||INOXLEISUR||490.5||0.5||M&E- Film Exhibition|
|6||Dish TV||532839||DISHTV||17.55||0.5||M&E- TV Broadcasting|
|7||DB Corp||533151||DBCORP||133.45||1||M&E- Printing & Publishing|
|8||Jagran Prakashan||532705||JAGRAN||66.85||0.5||M&E- Printing & Publishing|
|9||GTPL Hathway||540602||GTPL||174.4||2||M&E- TV Broadcasting|
The TV broadcast sector is poised for good growth despite the dull numbers posted by various segments of the economy lately. Industry reports state that TV penetration among all households is at 66% in the calendar year 2018. About 88% of all homes are now fully digitized. TV still has a long road ahead of itself in the country. Indians still spend an average 3 hrs 42 mins watching TV every day. However, Digital is growing at a fast pace alongside posing a risk to the traditional platform. In recent news, TRAI’s new tariff order modification (NTO 2.0) aims to reduce the pricing disparity of channels within a bouquet which in effect shall reduce either channels within the bouquet or the price of the bouquet. This has the potential to impact bouquet reach and channel subscription revenue.
India’s radio sector is fairly consolidated due to cost economies of scale and higher entry barriers. As a result, 80% of revenues and 70% of stations are held by the top 6 networks. This consolidation coupled with the expansion of radio in Phase III (to over 400 stations in 115 towns), means that a single network can now offer an advertiser significant reach and create a viable add-on to print.
Global print media
Global print media industry has been on the decline and losing consumers and thus advertising revenues to alternate mediums. On the contrary, as the oldest pillar of the M&E industry, Indian print media has not only survived through peaks and troughs over a period of time but continues to grow defying the global trend, but the question is whether it will continue to do so. With a shift to digital, the future prospects (and thus terminal values) of print media continue to be shrouded in an air of uncertainty. Indian print media had been caught up in the crossfire of demonetisation, GST, an economic slowdown and Government clampdown on classified ads but it may still have a few more years of growth ahead of it. The factors that differentiate the Indian print media industry from its global peers is local content, a unique distribution model, low literacy, cultural habits etc.
The cinema business model has evolved from being a single-screen theatre to multi-screen multiplexes. Despite a premium, more and more people are preferring multiplexes over single-screen theatres because it gives them a variety of different experiences to choose from, be it for comfortable seating, better screen quality, choices in food and beverages, or ultra-premium movie experience. Thus, despite the emergence of online platforms such as Netflix and Prime, people still go to multiplexes just for a great cinematic experience. Multiplexes in India are witnessing a very rapid growth. With 31% market share of the screens, they account for 55% share of Box Office Collections. The average spending per household on movies in India has grown from between Rs.368-388 per household in FY 2014-15 to approximately between Rs.433 – 453 per household in FY 2017-18. The average spending on movies is expected to reach between Rs. 589-609 per household in FY 2022-23. With a population of more than 130 crore and a median age of 28 years, there is a humongous market for media and entertainment. India’s current cinema screen penetration is one of the lowest in the world at 8 screens per million population. Even with such a huge market, there are only two listed multiplex chains with a pan-India presence. Before buying multiplex stocks, investors should look at the company’s geographical presence, capex plan, occupancy levels, spends per head, footfalls, segment-wise revenue (revenue from food & beverages, advertising, etc) and debt levels.
COVID-19 Impact: Various segments of M&E have got affected by postponement / cancellation of events, impact on theatrical revenues due to shutdown of cinemas, stoppage of print production / circulation in impacted areas, newsprint import blockage, stoppage / delay of content production and post production, etc. Positives could include increased time spent with media through OTT content at home. Nevertheless, with robust media consumption underpinned by demographic trends and improving content availability as well as access-economics, this key sector of the Indian economy is expected to bounce back along with macro-environment in due course.
The below mentioned model portfolio includes the best stocks in the media & entertainment industry to invest in for the long term which checks the boxes of fundamentally strong companies.
Detailed Overview of Best Media Stocks
SUN TV is one of the largest Television Broadcasters in India operating Satellite Television Channels across four languages Tamil, Telugu, Kannada and Malayalam and also airing FM Radio Stations across India. It continues to have sustained and increased viewership of its channels with Sun TV being the most watched channel in India. Due to the covid-19 pandemic, broadcasters have witnessed a steep impact on revenues and earnings on account of economic standstill during the lockdown. The subscription revenue is growing at a rapid pace. At a time when many companies in the Media sector are facing a cash crunch, Sun TV has a better liquidity position with a net cash of over INR 32.3b presently, and zero debt which would help it maintain a stronger position in the current crisis. Sun TV’s leading channels have witnessed significant improvement in viewership ratings across genres, and the company is likely to hold its ratings going ahead.
The company’s video on demand service – Sun Nxt has a subscriber base of over 20 Mn and the OTT segment has turned profitable. of content, the company offers room for growth. Majority of the revenue generated in the television industry is through advertisements, followed by subscription. Strong growth projected in DTH, Digital Cable segment would result in substantial increase in subscription revenue over the years to come. By virtue of the consistently high TRPs, popularity of content and its established presence, the company has significantly bargaining power over its content providers. This in turn, has aided in control over telecasted content. The company has also reported healthy profit margins with an OPM of 62% aided by its scale, high bargaining power and negligible interest cost.
Over the last few years, Sun TV has been consistently paying out healthy dividends although FY20 was an exception as the company paid out 70% of its profit in dividends at the end of FY20. The dividend payout ratio in FY21 stands at 13% which is the lowest in the last many years but currently it has a dividend yield of 2.98% which is excellent for dividend seekers. On the negative front, Sun TV has relatively high working capital intensity due to delays in actual payment receipts from advertising agencies and DTH/cable operators, beyond the credit period offered.
The company derives over 40% of its revenues from advertisements which are also dependent on the macro-economic environment. One of the risks is the company is not going aggressive to acquire content for its OTT platform like other players and in addition, rising competitive intensity with increase in the total number of channels in the mass content and niche segments could also pressurize the company’s advertisement revenues.
PVR is the largest multiplex operator in the industry with 178 cinemas and 855 screens in 72 cities in India. The acquisition of SPI Cinemas having 76 screens in August, 2018 further strengthened PVR’s leadership position. PVR, being the market leader, is able to command strong brand value and has established strong relationships with various real-estate developers which enables it to launch properties at premium locations. This in turn leads to higher average ticket prices and adequate occupancy levels.
Healthy occupancy levels and high average ticket prices have led to strong growth in operating income and strong profitability over the years. However, the operating metrics in FY21 has been severely hit due to the covid-19 pandemic. Lower occupancies/temporary screen closures and increased debt availed to maintain liquidity because of the impact of COVID-19 has resulted in some deterioration in the financial profile over the near term. However, restrictions are easing over the country, and multiplexes are expected to bounce back. The company was able to successfully navigate the challenges through a continued focus on reducing fixed costs and keeping adequate cost-containment measures, the company was able to reduce its fixed costs by 63% in FY21. With green shoots in demand recovery clearly visible, the strong line up of movie releases has been announced. PVR continues to be exposed to the inherent risks in the movie-exhibition industry gaining popularity such as Netflix & Amazon Prime and other forms of entertainment from the OTT medium.
Inox Leisure among India’s largest multiplex chains, operates in 70 cities with 667 screens across 158 multiplexes. It is the second-largest multiplex operator having scaled up through organic and inorganic expansion in the last decade from 2 properties in FY03 to 153 in FY21. Its strong market position is reflected in its ability to maintain ticket prices (average ticket price was Rs 226). INOX continually invests in upcoming technologies to enrich the customer experience.
To provide an extraordinary experience to moviegoers, Inox has partnered with IMAX to upgrade their technology. In order to improve its footfalls and occupancy rate, the management has undertaken several initiatives such as tie-ups with sports and music events, increase F&B counters, installation of kiosks for F&B orders, on-seat delivery, INOX loyalty program, and reducing seats per screen by increasing focus on the quality of cinematic experience.
In order to improve its market share, Inox has already laid out its aggressive expansion programme for next 5 to 7 years. Besides being the only multiplex chain in the country to be net debt free, INOX has managed to maintain a strong liquidity of close to Rs 300 Cr including undrawn limit of Rs 120 Cr. Long term target of the company is to open 70-90 screens each year.
Inox Leisure Ltd. forms a part of Inox Group of over 90 years old. Being backed by an esteemed group gives the company a great deal of credibility in the markets. The emergence of online media platforms creating another alternative to cinema business, economic slowdown, piracy, and competition are key risks for the company.
Risks to consider before investing in Best Media stocks
The M&E sector is diverse and encompasses different segments each performing and operating in environments that have a unique range of risks. In no other industry is the pace of change greater than in the media and entertainment sectors. Shifts in both the nature and scope of this sector means that businesses need to constantly evaluate new risks in the Media & Entertainment Industry and assess their exposure. The advent of Digital and launch of multiple new platforms led by cheaper bandwidth, significant viewership expansion caused fragmentation of the consumer base across platforms. These higher churn rates and lower stickiness provide an opportunity to wean away viewers from traditional dominant players in television, but also poses a challenge as monetisation models are still evolving. The COVID-19 pandemic is a major black – swan event which has dragged the economy and the advertising environment as a result. The immediate impact on the ad-driven media industry will be significant; however, an increasing proportion of subscription revenues will help. However, with people being homebound, consumption of media & entertainment and digital media in particular will see considerable growth. Greater demand will be seen for at home entertainment with subscription models and gaming. Segments such as films could see a slower recovery but fundamentals remain intact for the long term.
Watch this Video on how you can select the Best Media Stocks:
Model Portfolio of Best Media Stocks
In order to get exposure to best Media stocks, you need a total of Rs 20,097 for the below-curated portfolio as of Sept 20, 2022.
|Company||CMP – Sept 2022||Quantity||Amount||Weightage (%)|
|Sun TV Network||455.3||18||8195.4||0.41|
A detailed table with various parameters for Best Media Stocks to buy
|Sr. No||Company Name||BSE Scrip Code||NSE Symbol||CMP – Sept 2022||Rating||Industry||Market Capitalization (Rs Crore)||Price/Earnings||Dividend Yield (%)||Debt/Equity||Return on Equity (%)||Return on Capital Employed (%)||Net Worth (Rs Crore)||Operating Margin (%)||Topline- 3 Years CAGR (%)||
Bottomline- 3 Years CAGR (%)
|1||Zee Entertainment Enterprises||505537||ZEEL||270.75||0.5||M&E- TV Broadcasting||23287.7||21.79||1.03||0.04||8.11||14.1||10349.65||22.64||4.96||-18.52|
|2||Sun TV Network||532733||SUNTV||455.3||4||M&E- TV Broadcasting||17930.85||10.43||3.02||0.01||22.86||29.48||7666.27||63.96||2.35||9.51|
|3||PVR Ltd||532689||PVR||1,765.10||0.5||M&E- Film Exhibition||10286.39||0||3.56||-45.7||-6.73||1469.07||-5.22||-50.68||N/A|
|4||Network 18 Media & investment||532798||NETWORK18||69.75||0.5||M&E- TV Broadcasting||8,150||44.1||0||3.74||6.08||19.8||592||19||36.8||30.3|
|5||Inox leisure||532706||INOXLEISUR||490.5||0.5||M&E- Film Exhibition||5195.13||0||3.96||-56.27||-5.59||720.31||22.91||-57.85||N/A|
|6||Dish TV||532839||DISHTV||17.55||0.5||M&E- TV Broadcasting||2844.79||0||0.2||-26.55||11.7||2773.66||59||-11.16||N/A|
|7||DB Corp||533151||DBCORP||133.45||1||M&E- Printing & Publishing||1,607||9.42||3.31||0.13||7.65||10.1||1,828||19.7||-13.3||-25.6|
|8||Jagran Prakashan||532705||JAGRAN||66.85||0.5||M&E- Printing & Publishing||1,728||8.57||0||0.16||4.54||5.12||1,970||22.8||-17.6||-31.9|
|9||GTPL Hathway||540602||GTPL||174.4||2||M&E- TV Broadcasting||2026.02||9.64||2.22||0.24||24.34||32.32||924.05||20.19||31.24||47.41|
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