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Weak start to FY26; ad revenue recovery remains key

• Sun TV reported a muted quarter with persisting pressure on ad revenue (-10% YoY). Overall 1QFY26 revenue declined ~2% YoY, while opex remained elevated, leading to a 13% YoY decline in EBITDA (11% miss).
• SUN TV acquired a 100% stake in Yorkshire-based The Hundred franchise “Northern Superchargers” for GBP100m. We view this as an expensive acquisition, given the current media rights value and competition from other UK sports for any significant improvement in media rights over the long term.
• Recovery in ad revenue remains a key near-term monitorable. However, we continue to believe that the Star-Viacom merger is a potential double whammy for SUN TV due to: 1) higher competition from deep-pocketed players for ad revenue in the core business, and 2) a potential downward revision in IPL media rights in the next renewal cycle (from FY29), which would significantly impact the valuation for SUN’s IPL franchise (SRH).
• We cut SUN TV’s FY26-27E EBITDA by 3-4% due to weak ad revenue and elevated opex. We cut our FY26-27E PAT by 5-8%, due to lower other income, following cash utilization for purchasing Norther Superchargers. ? We expect SUN TV’s EBITDA to remain broadly stable over FY25-28E as weaker ad revenue continues to weigh on core business margins.
• At ~13x one-year forward P/E, valuations remain ~20% below historical averages, but the stock lacks catalysts for sustained growth and re-rating.
• We value SUN TV on an SoTP basis: 7x Sep’27 EV/sales for SRH, ~5x EV/EBITDA for the core TV business, 0.5x investments for Northern Superchargers, and 1x for cash/dividends (~INR85b) for our revised TP of INR600 (implies ~14x FY27E P/E).

We maintain our Neutral rating. Weaker ad revenue leads to 16% YoY decline in EBITDA (7% miss)

• Overall revenue declined 2% YoY to INR12.6b (4% miss) ? Advertising revenue at INR2.9b (9% below) declined 10% YoY (vs. - 17% YoY for Zee). ? Domestic Subscription revenue at INR4.7b (6% beat) was up 10% YoY (vs. +1% YoY for Zee), aided by price hikes in DTH.
• IPL revenue at INR4.8b declined 4% YoY due to relatively weaker performance of SRH in the recent IPL.
• Operating expenses grew 12% YoY to INR 5.5b, led by a 23% YoY surge in programming costs.
• Employee expenses rose by a modest ~3% YoY, while other expenses grew 7% YoY.
• EBITDA declined 13% YoY to INR6.2b (11% miss) as margin contracted sharply YoY to 49.1% (vs. 55.4% in 1QFY25), hit by higher operating expenses and operating deleverage.
• Depreciation declined 6% YoY (-9% QoQ) to INR1b (vs. our estimate of INR1.4b), while other income grew 29% YoY (-20% QoQ) to INR1.8b (vs. our estimate of INR1.9b).
• Net profit declined by 3% YoY to INR5.3b (6% miss) as weaker EBITDA was partly offset by lower depreciation and tax rate.
• SUN TV declared an interim dividend of INR5/share.

Valuation and view

• We believe the Star-Viacom merged entity could be a potential double whammy for SUN TV due to: 1) higher competition from deep-pocketed players for ad revenue in the core business, and 2) a potential downward revision in IPL media rights in the next renewal cycle (from FY29), which would significantly impact valuations of SUNTV’s IPL franchise (SRH).
• We cut SUN TV’s FY26–27E EBITDA by 3-4% due to weakness in ad revenue and elevated opex. We cut our FY26-27E PAT by 5-8%, due to lower other income, following cash utilization for purchasing Norther Superchargers.
• We expect SUN TV’s EBITDA to remain broadly stable over FY25-28E as weaker ad revenue continues to weigh on core business margins.
• At ~13x one-year forward P/E, valuations remain ~20% below historical averages, but the stock lacks catalysts for sustained growth and re-rating.
• We value SUN TV on an SoTP basis: 7x Sep’27 EV/sales for SRH, ~5x EV/EBITDA for the core TV business, 0.5x investments for Northern Superchargers, and 1x for cash/dividends (~INR 85b), for our revised TP of INR600 (implies ~14x FY27E P/E). We maintain our Neutral rating.

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