November 15, 2018

Are Media Stocks good to buy? Changing advertising trends will replace regular TV connected to Set top boxes with Smart TV with internet

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Are Media stocks good buy, keeping ad revenues in mind as we are nearing elections?

To analyse investment in media stocks, lets understand the structure of the Indian media industry.

Structure of Media Industry:

  • Key sectors that come under this category – TV’s, Newspapers, Multiplexes, Internet Users & Radio.India has 168 Million television households, 82,000+ newspapers (registered – 4,500+), close to 2,000 multiplexes and close to 300 Million Internet users – second largest base after China, and is expected to reach out to 640 million by 2019.
  • By end of 2019, digital advertising is projected to have the highest CAGR of 30.2%, while all other sub-sectors are expected to grow at a CAGR between 8% and 18%.
  • Television, print and films together accounted for 79.54 per cent of marketshare in 2016, in value terms. TV penetration in India is about 61% and is expected to reach 72%, the digitisation of cable TV in India is in progress, direct-to-home (DTH) subscriptions are growing rapidly, driven by content innovation and product offerings.

Analysis:

India is one of the highest spending and fastest growing advertising market globally. The country’s expenditure on advertising is expected to grow at 12.1 per cent to Rs 68,334 crore (US$ 10.59 billion) by the end of 2018. As per MMA – Mobile advertisement spending in India is estimated to grow to Rs 10,000 crore (US$ 1.55 billion) by the end of 2018. Well to tell you – consensus is derived from above numbers is only by considering the usual pattern of media advertising.

One must take cognisance of the fact that, emergence of new digital advertising trends has certainly changed the way one looked at Media industry & the revenue. New digital trends includes – Digital Content marketers like Netflix, Amazon Prime, HotStar, Voot – are some of the players amongst the niche category to name a few. One can easily draw possible estimates to match the ‘growth in mobile penetration’ trends to ‘growth in Social media advertising’. This new age digital advertising trends totally change the dialect of present Media industry – indeed they are several trend forecast that are being done to even say – Television channels as a medium might get superseded – and it may be an era of all contents being sold on digital platforms – thereby your regular TV & Set Top Box, will get outcasted by Smart TV connected to internet which stream only categories of visuals which you can choose to watch.

Drawing consensus by above trends – i would indeed signal a ‘BUY’ call on Media stocks for both short term (< 1 year) & long term. Having said this – i would rather ask you get analytical while you add Media stocks to your portfolio – categorise media house stocks based on Market Cap, analyse to see which stocks have remained – revenue positive along with free cash flows. Analysing a media houses by judging as is – penetration levels into digital trends & their futuristic statements highlighting their migration plans – choosing stocks based on these lines will certainly pay rich dividends to your investments.

–    Article by Suman Adithya Rao (SEBI Certified Research Analyst, Management Graduate in Entrepreneurship & Small Business Management)
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Disclaimer: Consensus expressed above is purely a educative in nature to highlight trends in the above said industry & to learn to get analytical by drawing perspectives based on these trends. It does not emphasise nor does it endorse any ‘buy’ / ‘Sell’ / ‘Hold’ calls whatsoever. Please consult authorised financial planners while investing in stocks. 

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