We maintain that demonetisation will largely be a 2-quarter blip as easing of cash crunch, good monsoon, rate cuts and seventh pay commission will revive consumer demand gradually. Usually Q3 accounts for 35-40% of total ad spends, but Q3FY17 saw major ad spend cuts post November 8.
E-wallets, government and BFSI ad spends came to the rescue and slightly mollified the impact of demonetisation. In the upcoming budget, we expect the government to announce stimuli for rural and middle classes in turn spurring high demand that will percolate to high ad spends by FMCG companies.
Further, despite demonetisation, Zenith (ad agencies) has forecast ad growth of 11.2% y-o-y in CY17. However, GST is likely to be disruptive and may impact ad spends. We expect ZEE to report 1% y-o-y ad growth in Q3FY17.
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Sun TV, which saw market share gains in Telugu and Malayalam, is still likely to report 4% y-o-y ad dip due to loss of ads from local jewelers and retailers. We expect ad growth revival for Sun TV to be delayed to Q1FY18.
Radio companies like Radio City are expected to report mid single-digit growth. PVR is expected to report 10% y-o-y ad growth (lower than its historical high double-digit growth).
New launches in auto/FMCG will also lend fillip to advertising. Enhanced competition from Reliance Jio will result in higher spends in telecom sector.
DB Corp will benefit with higher ad rates playing out, while Jagran Prakashan will benefit from the UP elections.