Cheaper Newsprint, Election Ad Blitz To Boost Margins Of Print Media Firms
After a subdued year, a surge in advertising during elections and lower newsprint prices is expected to aid newspaper companies’ margins.
The wholesale prices of newsprint have been falling since late last year, according to the Wholesale Price Index. They have cooled from Rs 50,000 per tonne to Rs 42,000 per tonne due to increased supply, Sachin Gupta, senior director at Crisil, said in a report. The operating profit of print media companies will rise by around 500 basis points due to the hike in government advertisement rates and softening of newsprint prices, it said.
Shares of HT Media Ltd., the publisher of Hindustan Times, have jumped 16 percent so far this year, while DB Corp Ltd., the publisher of Dainik Bhaskar, is up 14 percent.
“Political advertising has already been on the rise since September because of state elections and in the run-up to the general election, advertising spends have inched higher,” said Sam Singh, chief executive officer - South Asia at Group M, a media planning and buying agency. “The biggest beneficiaries of political advertising will be regional television channels and newspapers.”
A weak festive season and high raw material prices weighed on the print media industry in 2018. The December-ended quarter was muted as government advertising remained soft, an executive from HT Media told BloombergQuint on condition of anonymity. The media house, however, is upbeat about the ongoing general election, higher circulation revenue and lower newsprint cost.
Earlier this year, the government also increased rates for print ads of the government by 25 percent. This was the second hike in six years after a 19 percent jump in 2013.
Government ads contribute 19 percent to the total print revenue, DB Corp said (a spokesperson of the company told BloombergQuint), adding that it expects advertisement revenue to increase by around 3.5-4 percent.
Print media contributes almost 90 percent to DB Corp Ltd.’s overall revenue and for Jagran Prakashan Ltd., it stands at 73 percent, according to their exchange filings. For HT Media, it contributes 65 percent.
Rohit Dokania, research analyst at IDFC Securities, expects a good performance for the March-ended quarter due to softening of raw material prices and rising government ad spends. “Though the government ad spends will halt due to applicability of model conduct of conduct (from March 10), but political ad spends will increase especially in the states of Hindi Heartland.”