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(Rs m) | 3QFY04 | 3QFY05 | Change | 9mFY04 | 9mFY05 | Change |
Net Sales | 415 | 385 | -7.2% | 974 | 997 | 2.4% |
Expenditure | 231 | 278 | 20.6% | 538 | 780 | 45.1% |
Operating Profit (EBDITA) | 184 | 107 | -42.0% | 437 | 217 | -50.2% |
EBITDA margin (%) | 44.4% | 27.8% | 44.8% | 21.8% | ||
Other income | 1 | 13 | 892.3% | 5 | 58 | 1142.6% |
Interest | 1 | 0 | -80.0% | 12 | 1 | -94.1% |
Depreciation | 28 | 41 | 46.0% | 77 | 117 | 51.6% |
Profit before tax | 157 | 79 | -49.7% | 352 | 158 | -55.2% |
Tax | 56 | 31 | -44.3% | 126 | 60 | -52.4% |
Profit after Tax/(Loss) | 101 | 48 | -52.7% | 227 | 98 | -56.7% |
Net profit margin (%) | 24.4% | 12.4% | 23.3% | 9.8% | ||
No. of Shares (m) | 48.0 | 58.0 | 48.0 | 58.0 | ||
Diluted earnings per share* | 8.4 | 3.3 | 6.3 | 2.3 | ||
Price to earnings ratio (x) | 26.7 | 39.0 | ||||
(* annualised) |
On the subscriptions front, while both the news channels of TV Today are free-to-air currently, the company had expressed its intentions earlier of becoming a pay channel once CAS is in place. However, as yet, there has been no progress on either front – pay channels and CAS. Also, the company had expressed intentions of venturing into international markets like the US and the UK, in an effort to tap the huge Indian population residing in these countries. However, as yet, there has been no further announcement by the company in this regard.
Operating profits tumble: The total expenditure during the quarter has witnessed a YoY rise of 21% despite the fall in topline thus denting the operating margins severely. These have fallen from over 44% to under 28%, which has consequently led to a 42% fall in operating profits. While the transmission & production costs and promotional expenses have been under check, employee costs continue to surge as they increased by 35% during 3QFY05 over the corresponding quarter last year. Other expenses have also increased by 46% and this includes expenses incurred by the company on account of implementation and stabilization of new look of its Hindi channel – Aaj Tak, seemingly a step in response to the increasing competition.
Net profits halve: On the back of the dismal topline and operating level performance of the company, the bottomline has witnessed a 53% fall. The near 900% rise in other income (on a very small base) has negated the impact of a 46% rise in depreciation charges.
It must be noted that significant competition has cropped up in the news segment with the entry of Hindi news channels like Sahara Samay and NDTV India. Even DD News has undergone a revamp and is now a stronger contender in the Hindi news genre. All this has forced TV Today to compete harder and spend more in order to maintain its already deteriorating market share. Just to put things in perspective, 'Aaj Tak' has lost its clear dominance, which can be gauged from the fact that its market share has nearly halved over the last couple of years from near 55% levels in terms of Hindi news viewership.
Though competition is likely to intensify going forward, we feel that in the medium term, the company is relatively well placed to face the competition in the Hindi news genre on the back of its strong brand value and its style of delivering news and its market share should stabilise at around the current levels. However, investors should keep in mind the relatively higher risk profile of the stock owing to lack of diversification, as well as the company's reliance on only one channel (Aaj Tak) for revenues, until Headlines Today starts to contribute effectively to the company's overall performance.
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