Stock Idea - Television Eighteen (TV18) India

Recommendation: Buy

CMP = Rs 388

Price target: Rs 571

Result highlights:

• TV18 pulled out a robust performance for Q3FY2008. The operating revenues for the quarter grew by a healthy 73.8% to Rs 112.6 crore. All the segments—news, internet and newswire—registered high growth numbers.
• The news business revenues grew by 57.5% yoy to Rs 91.4 crore reflecting niche positioning of its channels CNBC TV18 and Awaaz. The operating profit margin (OPM) for the segment was up 100 basis points qoq to 44%.
• Web18 continues in investment mode. Thus despite a stupendous 161.6% year-on-year (y-o-y) growth in the revenues to Rs 17.6 crore, the operating loss stood at Rs 7.2 crore, as the company wrote off all the costs incurred (rather than capitalising on it). Thus Web18 is spending heavily after its growth, the results of which we believe would be seen over the longer term.
• Newswire18 posted a 44% quarter-on-quarter (q-o-q) growth in its revenues to Rs 3.6 crore. The operating loss in Q3FY2008 was down at Rs 1.7 crore against Rs2.2 crore in Q2FY2008. The business is witnessing rapid subscriber addition and we expect the business to break even in FY2009. 
• The consolidated OPM of the company during the quarter stood at 28.1% against 45.3% in the corresponding quarter last year Q3FY2007 (and 26.7% in the previous quarter Q2FY2008). The overall OPM continues to be impacted by the heavy spend on augmenting the internet and the newswire businesses. Thereby the operating profit growth was restricted to 7.6% yoy to Rs 31.6 crore.
• TV18 forayed into print media by acquiring 40% stake in Infomedia India (Infomedia). The company has made an open offer to the shareholders of Infomedia for a further 20% stake in the company at Rs 237 a share, as TV18 intends to increase its stake in Infomedia to atleast 53%. 
• Close on the heels of acquisition of Infomedia India, TV18 forged an alliance with Forbes Media. While the alliance would begin with the launch of a business magazine soon, other publications would follow suit. The company also entered into a 50:50 joint venture with Jagran Prakashan for launching a Hindi business newspaper. The duo would also launch business dailies in other Indian languages. Thus TV18's foray in print media completes an integrated media model for Network18 group.
• I maintain positive stance on the stock and maintain Buy recommendation with a price target of Rs 571.