Accumulate Sun TV; target of Rs 294: KRChoksey

“Sun TV’s Q1FY13 result was in line with our expectation. Net sales stood at Rs 426crs, declined by 6.2% YoY as analog cable revenue decreased sharply on YoY. Advertising revenue showed modest growth of 5.2% YoY to Rs 243crs while DTH revenue grew by 6% YoY to Rs 89crs. EBITDA for the quarter was Rs 323crs, lower by 11.8% YoY as programming cost increased by 65% over Q1FY12. Consequently EBITDA margins declined by 470bps to 76%. At net profit level, the company reported Rs 164crs, degrowth of 12.5% YoY. Net profit margin was 38.6%, lower by 270bps over Q1FY12. Lower analog cable revenue spoiled the quarter; however recent deal of Arasu is encouraging and analog cable revenue is bound to inch up. Sun TV’s modest growth in advertising shows things are improving on ad spend front and we expect this momentum to continue. Maintain Accumulate.”

“Sun TV reported decline in net sales by 6.2% YoY as analog cable revenue dipped by 46% YoY to Rs 30crs. On ad revenue front, the company reported modest growth of 5% YoY as compared to degrowth in advertising revenue in last two quarters. DTH revenue showed growth of 6% YoY to Rs 89crs and International subscription revenue increased by 30% YoY to Rs 26crs. We expect strong revenue growth as advertising spend has shown signs of revival as major broadcasting companies have witnessed ad revenue growth on YoY basis. Also analog cable revenue will inch up as Arasu deal has been finally closed. Sun TV reported decline in EBITDA margin by 470bps YoY to 76% as 3 fiction shows increased programming cost for the quarter. We expect margins to remain under pressure considering competitive intensity and high cost of movie acquisition.”

“Arasu cable deal and revival in ad spend will boost revenues in FY13E and FY14E. Digitisation will further help to increase DTH revenue in southern market where the company has dominant market share. At current price, the stock is trading at 11.4x PE to its FY14E earnings. We maintain ACCUMULATE recommendation on the stock with a price target of Rs 294,” says KRChoksey research report.   

Non-Institutions holding more than 90% in Indian cos   

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