IGI Logo

Recovery to be gradual…

About the stock: Sun TV Network (Sun TV) is a leading regional broadcaster in India, which owns and operates a bouquet of 32 TV channels prominently across southern market (Tamil, Telugu, Kannada & Malayalam) and Bengali language and also an OTT app SunNXT.

* In its key market, Tamil viewership share has dipped from ~55%+ to ~40%+ in last few years, with peers, new entrants lapping up market share.

Q1FY22 Results: Sun TV’s performance was weaker than expected.

* 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). Subscription revenues declined 6% YoY to | 415 crore

* EBITDA was at | 495 crore, up 19% YoY on a depressed base with margins at 61.1% (down 762 bps YoY, 882 bps QoQ), due to higher operating costs

* PAT came in at | 389.8 crore, higher than estimate of | 367 crore, owing to lower amortisation (change in useful life estimation) by ~| 70 crore.

What should investors do?

Sun TV’s share price has underperformed with growth of mere ~9% over the past five years, owing to viewership market share loss.

* We maintain our HOLD rating

Target Price and Valuation: We value Sun at | 545 i.e. 12x FY23E EV/EBITDA

Key triggers for future price performance:

* Overall viewership share improvement, which has dipped in recent times. Recovery in key markets like Tamil/Telugu/Kannada to be ad growth driver

* Post NTO 2 led clarity on subscription growth

* Marked ramp up in SunNXT content, where it is lagging vs. peer

Alternate Stock Idea: Besides Sun TV, we like PVR in the media space.

* A play on reopening and improving market share of multiplexes

* BUY with a target price of | 1610

To Read Complete Report & Disclaimer Click Here

https://secure.icicidirect.com/Content/StaticData/Disclaimer.html

Above views are of the author and not of the website kindly read disclaimer