Listed media majors log muted Q1, could struggle in first half of FY25

For the film exhibition business, the June quarter was also sub-par due to the impact of both the cricket and election season as well as a lack of big-budget content

A cricket-heavy calendar, lack of big-budget movie releases and elections weighed heavy on listed media majors in the broadcasting and movie exhibition space during the first quarter of financial year 2024-25 (FY25).  

Barring Sun TV, which has outperformed the broader markets as well as the benchmarks with a return of 26 per cent over the last three months, returns for PVR Inox -- six per cent-- and ZEEL – flat -- over this period is nothing to write home about.

The advertising space in Q1FY25 was marked by IPL matches in April and May, the T20 World Cup in June and election-related ad spends.

FMCG ad spending slowed down in June, Balaji Subramanian and Siddharth Zabak of IIFL Research said. It was due to an erratic monsoon and in anticipation of the Union Budget.

Zee and Sun may see muted ad revenue growth, as they are under-indexed in the sports and news genres.

ICICI Securities too believes that advertising revenues are likely to remain soft for GEC broadcasters in Q1FY25 given the strongest cricket season in a quarter in recent memory and Lok Sabha elections helping news channels take away additional wallet share.

However, overall advertising spends continued to increase sequentially, noted Abhisek Banerjee and Jayram Shetty of the brokerage. 

Thinning footfalls

For the film exhibition business, the June quarter was also sub-par due to cricket and election season as well as a lack of big budget content.

Box office collections were 8 per cent lower on a sequential basis and flattish as compared to the year ago quarter.

While Q1FY24 had 60 per cent contribution from Hindi (42 per cent) and English (18 per cent), Q1FY25 had higher regional content at 57 per cent.

During Q1FY25, only one movie managed to cross Rs 100 crore mark in terms of net collections. Kalki 2898 AD which was released at the fag-end of the quarter did well accounting for 17 per cent of the June quarter collections.

In the previous quarter (Q4FY24), five movies had crossed the Rs 100 crore mark, accounting for 41 per cent of the box office collections. 

As compared to Q2FY24, the best-ever quarter for the industry, net box office collections were 44 per cent lower, point out Deep Shah and Kavish Parekh of Batlivala and Karani Securities.

Production houses held back key releases due to elections and the cricket season. 

Brokerage firm UBS Securities believes that Kalki 2898 AD won’t be enough for PVR Inox to breakeven at the operating level in Q1FY25.

Further, two thirds of collections are made in regional languages where PVR has a low presence. The company is likely to have a difficult first half of FY25 and recovery hopes are now dependent on the remaining two quarters of the year.     

Mixed bag for broadcasters

Advertising revenues for ZEEL and Sun TV are expected to be flattish. However, TV Today might register an ad revenue growth of 20 per cent Y-o-Y due to the positive impact of General Election spends. 

Led by price hikes, subscription revenues are expected to be in the 4-7 per cent growth band for ZEEL and Sun TV. Revenues from the movie segment of ZEEL is expected to see a sharp jump over the year ago quarter as the base quarter did not have any movies made and distributed by Zee while Q1 had two movies (Maidan and Mr & Mrs Mahi).

Elara Securities expects the operating profit margins for ZEEL to grow 200 basis Y-o-Y and 30 basis points Q-o-Q in the quarter to 10 per cent.

This could improve from the second quarter led by cost optimisation initiatives. The margins for Sun TV could improve by 130 basis points Y-o-Y and 610 basis points sequentially to 61 per cent. 

On the valuations front, IIFL Research has raised the target enterprise value to operating profit multiple for PVR Inox from 10.5 times to 11.5 times. This is due to a strong content pipeline, especially in 3Q which is expected to support the stock. 

ICICI Securities believes that in the medium term GEC TV broadcasters are likely to benefit as FMCG companies dial up their ad spends. While advertising and promotional spends as percentage of revenue increased by 180 basis points Y-o-Y for the ‘top 5’ FMCG advertisers (home and personal care) in India in FY24 at an aggregate level, the flow through to the revenue of GEC TV broadcasters was limited.

This was on account of a strong cricket season taking away wallet share from GEC and increased share towards digital medium to drive growth of premium product categories (given rural weakness). Rural recovery is expected to be followed by higher advertising spends in GECs. The brokerage expects this to lead to a rerating for both Sun TV and ZEEL.