TV Today Network shows signs of recovery in H2FY23

TV Today Network (TVTN) has reported improved performance in the second half of the fiscal year 2023 (H2FY23), showcasing resilience and growth potential. With a market capitalization (Mcap) of INR 12 billion, TVTN is well-positioned for future success. Elara Securities has raised its Buy rating on TVTN and set a Target Price (TP) of INR 260, reflecting an Upside potential of 26%.
Revenue & Margin Trend
In the second quarter of FY23, TVTN achieved a year-on-year (YoY) revenue growth of 1.1%. However, there was a slight 4% quarter-on-quarter (QoQ) decline, resulting in a total revenue of INR 2,139 million. The TV and digital segments contributed INR 1,633 million and INR 484 million to the revenue, respectively. Despite the growth, the EBITDA margin experienced a YoY decrease of 700 basis points, dropping to 5.5%. Profit After Tax (PAT) declined by 64% YoY to INR 70 million, primarily due to lower revenue growth and a significant fall in EBITDA.
The revenue growth in the TV segment remained modest, growing by 1.4% YoY in the first half of the fiscal year. Several factors affected the TV segment's performance, including increased competition from other channels, premium pricing of Aaj Tak compared to competitors, and limited price hikes for TV news.
The digital segment's revenue growth was also muted, showing a 2% YoY increase in the first half. This was primarily due to a 25% YoY decrease in yield from YouTube. However, strong growth in TVTN's own digital initiatives, website, and mobile app, Aaj Tak, partially offset this decline. Expectations are high for improved momentum in H2, with anticipated growth of 6-7% YoY in TV ad revenue and a potential boost to the digital segment, particularly if YouTube's pricing or yield improves. The estimated growth for the digital segment in FY23 stands at 7% YoY.
Despite flat content costs, the EBITDA margin saw a significant drop of 1,140 basis points in the first half of FY23. This decrease was primarily attributed to higher employee and other expenses, which increased by 15% and 21% YoY, respectively. Profitability was impacted by various factors, including investments in digital platforms, limited revenue growth in the digital segment, subdued TV revenue growth, and a challenging advertising environment.
Elara Securities expects improved revenue momentum in H2, offering respite to the margin. Key triggers for this anticipated growth include the festival season, enhanced revenue in digital advertising, and the positive impact of Election ad spend expected to yield results from Q4FY23.
The outlook for TVTN remains positive, and Elara Securities has made some adjustments to their revenue and earnings estimates. Revenue estimates have been reduced by 3.8% and 3.3% over FY25 and FY26 due to the muted growth environment. Earnings estimates have also been lowered by 18% and 16% over FY25 and FY26 due to the lowest-ever EBITDA margin of 5.8% reported in H1.
Elara Securities retains its Buy rating on TVTN and has set a new Target Price of INR 260, down from INR 280, following a thorough assessment. TVTN's core broadcasting business is currently trading at 4.8 times one-year forward Price-to-Earnings (P/E) excluding its healthy cash balance of INR 4.5 billion. The core broadcasting business has been assigned a 10 times one-year forward P/E, and the cash balance (INR 4.5 billion) and digital business have been valued separately (at 2 times one-year forward Mcap-to-sales).