Radhakishan Damani Portfolio Stock TV Today Network – Buy Recommendation

TV Today Network (TVTN) is a company engaged in broadcasting operations. Part of the India Today Group, the company operates mainly in three segments Television, Digital and Radio broadcasting. The company is also engaged in publishing, and its publications include India Today, Business Today, etc.

TV Today Network is one of India’s leading Hindi-English news television networks. Company derives ~82% of its revenues from Television Broadcasting which includes Advertisement and Radio segment at 3% and the balance from Magazines, Newspapers and Others. Aaj Tak YouTube Channel is one of the biggest and fastest-growing news channel in the world with 7.88 million subscribers.

Aajtak.in had won the Best Admired Customer Engagement Website at Asia Consumer Economic Forum (ACEF). So Sorry Videos bagged Gold under the Best use of Video Category at Indian Digital Marketing Awards (IDMA). Aaj Tak is the biggest Indian news platform on Facebook with more than 20 million fans and India Today is the 2nd largest Indian news platform on Facebook with around 10 million fans.

Investment Rationale

 One of India’s leading Hindi-English news television networks
 ‘Aaj Tak’ continues to be a dominant player
 Rising ad rate & yield per hour to boost revenues & profitability
 Boast strong experienced & known anchors
 Digital & Radio would also drive performance
 Robust Balance sheet and Strong Return Ratios
 Estimate 12% revenue and 24% EPS CAGR over FY19-21E

View and Valuation:

TV Today has reported strong ~9% CAGR in revenues due to strong advertising revenue growth over FY16-19P. We expect the company to continue to report healthy top-line growth of ~12% on back of strong growth in advertisement revenue (rising ad rate & yield per hour) and also subscription revenue is expected to rise in the coming years. On the operating front, we expect margin to witness strong improvement of 300 bps owing to the price hike and higher yield initiated in the ad segment.

TV Today has been able to take a hike in ad yields owing to its leadership position in the Hindi news genre. In addition, there has been incremental revenue flow from the English Channel India Today, which has been able to improve its ranking in the English news genre. Given market leadership in the Hindi news, strong BS and high cash on books and valuation at ~9x FY21E earnings seems quite attractive.

With a strong balance sheet and potential cash to be derived from radio business sales, the company is on a strong footing. TV Today has maintained its leadership in the Hindi news segment across cycles and enjoys a robust balance sheet with net cash of ~Rs 400cr.

The stock has corrected significantly ~38% in the last 12-15 months and offers favourable risk reward. Moreover, recent tax reform would also boost profitability of TV Today, as company was paying 33-35% taxes in the previous years and which will come down to 25-26%.

The stock is still available at attractive valuations of ~9x FY21E P/E. We recommend BUY at CMP of Rs 310 and add on dips to Rs 288 with sequential targets of Rs 343 and Rs 388 over the next 3-4 quarters. We have assigned 11.5x FY21E to derive TP of Rs 388.