Neutral Sun TV Network Ltd for the Target Rs 545 by Motilal Oswal Financial Services Ltd
IPL shines; valuations inexpensive but ad revenue growth vital for re-rating
* Sun TV Network (SUNTV) reported a strong 1QFY27, with revenue rising 13% YoY, led by a ~34% YoY increase in IPL revenue. Advertising revenue declined 2.6% YoY, while domestic subscription grew a modest 3.3% YoY.
* Excluding strong IPL led growth, core revenue grew by a modest ~1% YoY; however, profitability remained robust, with core EBITDA margin expanding 240bp YoY to 53%, indicating strong cost control in the core business. Overall, a stronger revenue mix and operating leverage drove EBITDA/PAT growth of ~19%/16% YoY, with EBITDA margin expanding ~240bp YoY to 51.5%. * We largely keep our estimates unchanged for FY27/28. We expect SUNTV’s revenue/EBITDA/PAT to increase by a modest 3%/1%/6% over FY26-29 amid persistent weakness in ad revenues weighing on core business margins.
* At ~12.6x one-year forward P/E, valuations remain ~20% below historical averages, but a pickup in ad revenue remains critical for re-rating.
* We value SUNTV on an SoTP basis: 7x Sept’28 EV/sales for SRH, ~4x EV/EBITDA for the core TV business, 0.5x investments for Northern Superchargers, and 1x for cash/dividends (~INR 88b), arriving at our revised TP of INR545 (implying ~12x FY28E P/E). We reiterate our Neutral rating
Valuation and view
* A gradual shift in FMCG ad spends toward digital platforms remains a key structural headwind for linear TV broadcasters such as SUNTV over the medium term. A sustained recovery in ad revenues remains the key trigger for any meaningful re-rating.
* We largely keep our estimates unchanged for FY27/28E. We expect SUNTV’s revenue/EBITDA/PAT to increase by a modest 3%/1%/6% over FY26-29 amid persistent weakness in ad revenues weighing on core business margins.
* At ~12.6x one-year forward P/E, valuations remain ~20% below historical averages, but a pickup in ad revenues across the core business remains critical for re-rating.
* We value SUNTV on an SoTP basis: 7x Sept’28 EV/sales for SRH, ~4x EV/EBITDA for the core TV business, 0.5x investments for Northern Superchargers, and 1x for cash/dividends (~INR 88b), arriving at our revised TP of INR545 (implying ~12x FY28E P/E). We reiterate our Neutral rating
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