Sun TV Network Ltd. share price target

Sun TV (SUNTV) reported in-line nos revenue/PAT was up 10%/14% YoY, with ad revenues reaching pre-pandemic (2QFY20) levels and delayed benefit from the IPL offering spillover. This was offset by a sluggish subscription revenue run-rate. Our FY23E/FY24E estimates are largely maintained; we build in a 6% CAGR over FY2023E. The recent upbeat valuation for the new IPL team auction makes the stock valuation compelling at below 10x on Sept'23E. Along with intensifying content investments to win market share, this is a...

Revenues (ex- IPL) at | 686 crore were up ~13% YoY, down ~12% QoQ, with ad revenues up ~94% YoY to | 244 crore, on a depressed base of Q1FY21 but down 23% QoQ (still ~34% below pre-Covid levels)....

Recovery in Ad revenues, new movie releases remain key to performance in ensuing quarters Sun TV's Q1 FY22 numbers came slightly below our expectations as Ad revenues declined by 22.5% qoq, while growing 93.7% yoy on an extremely low base of last year same quarter. The sequential fall was on the back of re-emergence of Covid Wave#2 in the quarter as advertisers reduced their ad spends. Even due to absence of any movie releases, the advertising revenues...

Revenue rose 34% YoY to INR8.1b (6% miss) in 1QY22, on a low base of last year that saw a stringent COVID-led lockdown and absence of IPL. Advertising/subscription revenue increased by 95%/-6% YoY. Revenue was, however, lower by 25% v/s pre-COVID levels (1QFY20). EBITDA stood at INR4.9b, up 18.8% YoY (11% miss), aided by a strong growth in revenue, but partly offset by increased opex (66% YoY,...

Sun TV, in its key market of Tamil, has improved its prime time fiction market share from 37% to 42% in the last three quarters, albeit it remains well below that earlier levels. The company envisages to take it to 50% in the medium term. Sun TV also intends to launch five to six shows including two big ticket shows (with total spend of | 50 crore for both shows) in Telugu and Malayalam in Q1FY22, which were delayed due to second wave that halted shootings. We expect the overall impact of the second wave and higher presence of local ad to push back ad revenue recovery. Furthermore,...

Production costs were up 23% YoY on the low base of 4QFY20. However, tight cost measures in employee/SG&A; (down 8%/17%) kept the overall operating cost flattish (up just 1.5%). EBITDA subsequently improved 9% YoY to INR5.5b (in-line); EBITDA margins stood at 69.9% (up 140bps YoY). Net profits were flattish (up 2% YoY) at INR4.5b (6% above estimate) on...

Delay in local retail revival leads to ad revenues decline Ad revenues have improved sequentially in unlock phases aided by festive boost. However, the decline was due to weakness in local retail sectors like jewellery, garments and other key retail clients while FMCG remains the biggest contributor. Currently, retail advertisers contribute only 10-12% of ad mix vs. 30% earlier and rebound in ad spend across all segments will be important. No fresh movie premiers also partly contributed to lower ad revenue. Ad minutes/hour was 12 during Q3 vs. pre-Covid levels of 16 (has...

Recovery in Ad revenues, new movie releases to lift up FY22 performance Q3 core businesses disappoint, numbers up due to IPL Sun TV's Q3 FY21 numbers came slightly below our expectations as Ad revenues declined by 10.7% yoy, while growing sequentially by 26% in a festive quarter. The sequential growth was on the back of opening of economy, normalcy coming back and advertisers increasing their Ad spend, however there was a yoy fall in advertisements from retail advertisers, local jewellers as demand for their products is still not fully recovered due to pandemic. Also due to absence of any movie releases, the advertising revenues have bore the brunt. Additionally there has been some market share loss in its...

In our interaction, management of Sun TV highlighted 1) plans to spend Rs2bn towards Sun NXT (OTT offering) and Rs3-4bn towards producing 8 new movies which are scheduled to release in next 12 months (release timeline can be delayed due to second strain of COVID) 2) IPL is likely to yield pretax profits of ~Rs1.2bn/Rs1.3-1.4bn in FY21/FY22 respectively and 3) pressure...

The subdued ad outlook in the near term affects growth prospects of Sun TV. Flagship channel saw dip in viewership post lockdown that does not bode well from ad rates/volume point of view. IPL profitability will also take a hit due to shift of venue, reduced sponsorship, etc. Hence, we downgrade the stock to HOLD. We would turn constructive when we witness SunNXT ramp-up, viewership share increase coupled with sustained ad recovery. We...