Yesterday’s Market Performance

Nifty: 16258.30 I 20.10 (0.12%)
FII Buy Net: 211.91 CR
DAX: 15,745.41 I 16.04 (0.10%)

Sensex: 54402.85 I 125.13 (0.23%)
DII Sell Net: 716.15 CR
FTSE: 7,132.30 I 9.35 (0.13%)

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Howdy Toasters!

In today’s issue, we discuss;

• Zee Entertainment’s Q1 results highlight: the company recorded revenue growth of 35% YOY and EBITDA grew 57% YOY.
• FII buying got the market touch 16,000 with the new resistance coming at 15,830.
• Top movers and shakers of the market, other important financial news, and an educative concept to help you keep learning. Read along!

IPCA Labs: 2293.15 | 121.80 (5.6%)

• The share price jumped over 6% after broking house CLSA upgraded the rating to outperform from sell

Chemcon Speciality: 491.10 | -36.65 (-6.94%)

• Profit booking took place, The share fell over 6% on August 9 even though the company’s net profit for the June quarter was up 51.9 percent at Rs 13.4 crore against Rs 8.8 crore (YoY)

Note: Above are not owned by the authors of the newsletter and are neither recommendations to buy the stocks; not our style at FinLearn

Zee Entertainment (Z IN) dropped their numbers: a tough quarter (?), but with some off-shoots to keep us enthused (you’ll make your own judgment right? :P) 

• Z IN recorded revenue growth of 35% YoY to INR 9.8 Bn (Q1FY21 was the onset of the pandemic, low base effect et al.); compared to Q1FY20, ad revenues dipped 22% (domestic ad revenues were down 23%)

• NTR 2.0 (& subsequent litigation) isn’t helping; (quick context: new TRAI regulations, allow the customer to pick and choose, a la carte the channels they want to subscribe to, in addition to setting a lower cap on each channel price that is part of a bundle, severely impacting broadcasters ability, who were previously used to bundling their services into one offering)

• A consequence (we hope in the short term) of NTR 2.0 litigation has been an embargo on pricing, leading to a dip of ~2% in network viewership share (quite massive); July recorded growth over June, yet ad revenues have been weak, with advertisers adopting a wait & watch approach

• The company has downwardly revised EBITDA margin guidance (from 25% earlier), directly risking Free Cash Flow / PAT generation by ~50%; weak ad recovery, higher than anticipated subscription revenue loss has meant the company has increased investments in content generation across Hindi & regional to revive ad-growth (& thus impacting margins)

• To give you context: EBITDA grew 57% yoy (base effect), however for the quarter programming & content costs jumped 32%, with original content production jumping across states in alternate locations (managing Covid-19 guidelines)

Where’s the off-shoot mate? I can only see a tough quarterly performance here (We got yaaa) 

• Zee5:  Z IN’s OTT platform (MAUs & DAUs stand at 80.2 Mn & 7.1 Mn) is coming along nicely, showing early signs of success through big-ticket launches in Q1, with 40% of monthly subscriber additions (those who signed up to watch Radhe and/or the Friends reunion) doing so for yearly plans (full revenue contribution will reflect in Q2, with the launch coming mid-way of the first quarter)
• Z IN plans to target the massive Indian diaspora in the US, (current estimates of 40- 50 Mn) tapping them with Hindi & regional content (release of Radhe, in addition to local audiences, was aimed at that) recording international revenue to the tune of INR 1.6 bn vs 1.4 Bn in Q1FY21, with subscriptions rising 17% YoY
• The company plans to increase focus on regional content (Hindi, Marathi & Tamil GECs), with a view towards reviving market share in the ensuing quarters (case in point has been the continuation of shooting, irrespective of lockdowns and extra cost adage)

Interesting! Anything else? 

• It was a tough quarter, and the company has guided for more weakness before there is any respite (margin loss for revenue gains), with the traditional business suffering for a variety of reasons (to be fair the company has highlighted measures it’s undertaking to rectify?)
• Zee5 is picking up? Global MAUs have grown from 42.6 Mn in Q4FY21 to 80.2 Mn in July 21 (nice!!)
• The stocks have been battered (for lack of a better word) in the recent past (see chart below), with a return of headline valuations of 36x way off, the initial signs have us enthused

To make sense of the above chart, and to analyze companies (like Z IN) that are in the bottom rung of their business/stock cycle, we run a course of Stock Picking & Long Term Investing; check out this link to know more!

How have market flows been in the last week? What have our institutional friends been upto? 

• Most Asian Indices (think: Indonesia, Taiwan, South Korea, Malaysia) were up 2/3%, implying a change a tact from a flows perspective (and going back to status quo from an Emerging Markets positioning perspective)

• In India, both Bank Nifty & Nifty were up over 3% during the week, with a significant increase in OI; Banks, Chemicals, Software & Services all had a good week, with Cement, Real Estate & Materials all underperforming

• Implied Volatility trended lower or remained at the same levels for most markets on the back of positive sentiments (see India VIX for below table)

What else caught our eye? 👀

Print advertising sees uptick ahead of festival season 

• Second half of 2021 is witnessing a surge in advertising, with brands across segments leveraging print advertising in a big way; academic courses, automobiles, real-estate were amongst the top 5 advertisers in the first half, amounting to ~30% of overall ad-space share

• One of India’s largest newspaper groups, Dainik Bhaskar indicated that July 21 performance was touching 2019 levels, with August poised to surpass that (nice)

You could soon own (realistically speaking) a Tesla in India (much to Bhavish Aggarwal’s dismay :P) 

• The government is considering slashing import duty on imported electric vehicles

  • EVs priced lower than USD 40,000, down to 40% from 60%

  • EVs priced greater than USD 40,000, down to 60% from the present wait for it, 100%

• We’d imagine this not sitting well with domestic automakers (case in point is the insane duty on luxury vehicles, in some cases as high as 120%), however, the government seems keen on pushing an EV agenda, and if that means introducing global competition to improve local skills, slashing duty and making it easier for players like Tesla to enter would be an ideal way to start (sorry Bhavish, Ola is great mate)

GST collections coming along well? 

• The government responded to a query in Parliament, indicating GST collections for the April to June quarter of FY22, were ~27% of the year target (nice?)

• Budget estimates for FY22 stands at INR 6.3 Lakh Crore (FY20 projection was upwardly revised after greater collection efficiency)

• Net GST Collections include Central GST + Integrated GST + Compensation Cess

MOAT