Sun TV Network Ltd. share price target

Ad revenues witness decline; expect recovery in H2FY21 Macroeconomic headwinds impacted ad revenues that fell sharply by 10.7% YoY (in line with industry). We highlight the management sounded cautious in term of outlook and indicated that recovery would be seen by Q2FY21, Q3FY21. Among positives, the flagship Tamil channel has gained ~5-6 percentage points' market share gain in last seven to eight months to 47% currently. The company expects benefits of the same to kick in with a lag. Going ahead, given the challenging macroeconomic environment, we factor...

15 February 2020 Slowing ad spends and a high base for movie revenue led to a decline in revenue and EBITDA. OTT segment profitability though was comforting. Economic weakness has slowed down ad spends and the TRAIs latest bouquet norms bring in uncertainty over subscription revenue growth. Revenue declined 10% YoY to INR8.1b (16% miss) in 3QFY20, majorly due to falling ad revenue (-12% YoY). Also, the base effect came into play as the year-ago period had high revenue of INR1b from blockbuster movie distribution, which declined to INR150m in 3QFY20. Production cost was down 10% YoY which led to flat opex and provided some cushion to EBITDA (-13% YoY to INR5.8b; 13% miss). Excluding the base effect, overall revenue was up 1.5% YoY in 3QFY20, PBT would have been higher by INR135m and PAT growth was 12% YoY. Nxt subscribers stood at 15m, and the OTT segment has turned profitable.

New Tariff Order to keep Subscription revenues buoyant along with digitization Sun's subscription revenues are growing at a strong pace of >20% as digitization wave with the New Tariff Order (NTO) tailwinds are impacting the business positively. Digitization is also proliferating with momentum in TN with market conditions easing over there. Although its ARPU has declined in the past quarter, its stable now leading the DTH business to grow at a decent rate of 5-10%. Management...

1HFY20 revenue/EBITDA grew (a) Subscription revenue should reach INR4,200-4,300m quarterly run-rate by 4QFY20, with INR1b digital revenues and 20m OTT subscribers from 11m currently. Also, content cost should remain high due to spends on OTT, the Bangla channel and increased spends to protect market share in We have cut TP to INR525 (v/s INR600 earlier) based on the cut in estimates, valuing it at 13x P/E on FY21E EPS of INR40. Broadcasting revenues were down by 53% YoY to INR80m International subscription revenues were down 15% YoY to INR410m Domestic cable revenues grew strongly by 40% to INR1.7b on account of DTH revenues grew by 4% YoY to INR2.3b Revenues from films stood at INR123m during the quarter Production expense rose by 96% YoY to INR1.7b on account of new launches in Bangla and high cost fiction program launches. Expect to make subscription revenue of INR1,000m on investment of INR1,500m Sun TV is confident of maintaining/increasing market share across languages.

Sun TV reported a weak set of numbers with a challenging economic environment, increased costs (including some one-offs) weighing on topline and EBITDA. Advertisement revenues at | 337 crore, down 1.5% YoY were impacted by a weak economic environment. Subscription revenues, however, witnessed robust 16.9% YoY growth aided by strong monetisation from NTO implementations. EBITDA at | 469 crore (margin of 58.9%) was lower than estimates of | 526 crore on account of certain one-offs related to CSR and bad debt provisioning aggregating to | 33 crore and continued...

Weak ad growth; cautious outlook in near term The quarter was marked by weakness across the key segment of advertisers owing to macroeconomic headwinds. The management also sounded cautious in term of outlook and indicated that it expects mid-single digit growth in FY20, at best. In terms of market share, the company has gained 2-3% market share gains from the bottom in Q4FY19 due to NTO in key genre of Tamil and is looking to maintain aggressive content spend to wrest back some more market share. Going ahead, we factor in 7.5% CAGR in TV...

Strong subscription overshadowed by weak ad growth: Revenue declined 2% YoY (7% miss) in 1QFY20, as strong subscription revenue growth (+28% YoY to INR4.0b) was overshadowed by flattish ad revenue (+2% YoY) amidst a weak ad market. The impact was accentuated by early accrual of partial IPL revenue in 4QFY19, leading to lower contribution in 1QFY20. EBITDA too was down by 7% YoY (9% miss), as content cost (accounted in operating cost) doubled YoY owing to the new Bangla channel launch and the recent...

NTO impacts ad revenues; cautious outlook in near term The company indicated that advertisement revenues were impacted as key advertisers had pulled down ad volumes ahead of NTO implementation led uncertainty while there was also some ad shifting from GEC to sports genre due to IPL. The management sounded cautious in terms of outlook in the near term and guided for ad growth recovery from H2FY20 onwards. We highlight that the company has not seen an improvement in market share in key genres of Tamil, Telugu and Kannada and is looking to launch fictional...

grew 16% YoY to INR6.1b (3% beat); margins, however, contracted 440bp YoY to 68.4% impacted by high production cost and IPL related increase in SG&A.; But, movie amortization cost pulled down PAT to INR2.8b, -2% YoY (23% miss). For FY19, revenue/EBITDA/PAT grew 28%/31%/28%. Concall highlights: (1) FY20 subscription revenue should grow at 14-15%. (2) Expect 1HFY20 ad growth to remain under pressure due to viewership impact from TRAI's New Tariff Order. (3) Currently, ~38% homes in Tamil...

as well as Advertising revenues grew strongly at 24% and 13% yoy respectively. Management highlighted that despite dip in market share in Q3, there has been a good revival in January. Cable TV revenues grew 24.3% on new tariff regime implementation, while DTH revenues grew by 24.1% pulling up the overall domestic Subscription revenues by 24.2% yoy. Also the continued process of...