Hold Sun TV Network; target of Rs 359: KRChoksey

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Hold Sun TV Network; target of Rs 359: KRChoksey

KRChoksey has recommended hold rating on Sun TV Network with a target of Rs 359, in its February 14, 2012 research report.

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KRChoksey has recommended hold rating on Sun TV Network with a target of Rs 359, in its February 14, 2012 research report.

"Sun TV's Q3FY12 result was below our estimates due to drastic fall in analog cable revenue. The company reported net sales of Rs 425cr which was down by 5.7% QoQ and 29% YoY. This mainly on account of analog cable revenue dropped by 38% QoQ and 45% YoY. EBITDA stood at Rs 341cr, down by 6.5% QoQ and 32% YoY. Operating margin was down by 80bps QoQ and 370bps YoY to 80.2%. At net profit level the company reported Rs 168cr. Higher other income improved net profitability at 39.5% down by 50bps QoQ and improved by 180bps YoY. In spite of stiff advertising revenue, ad revenue for the quarter was marginally down by 5% as compared to its industry peers. Digitization of the cable industry coupled with new launches will help the company to regain domestic subscription revenue."

"Sun TV recorded Rs 244cr advertising revenue which was up by 4% QoQ and showed degrowth of 7% YoY. The management didn't give advertising growth revenue guidance for FY12 however sluggish ad market outlook was maintained. Sun TV's dominance in South helped it to perform better than the industry peers. We believe slowdown in ad revenue will have an adverse impact on overall revenue. The company reported analog cable revenue of Rs 29cr which was down by 38% QoQ and 45% YoY. The fall was on account of no deal with Arasu cable. The company has launched 12 new channels which will help to boost subscription revenue in near future. Sun TV reported international subscription revenue of Rs 24cr, a growth of 33% QoQ and 20% YoY."

"We believe Sun TV is a complete package with monopoly in south market, increasing foothold in DTH space and growth in overseas markets. Currently the stock is trading at 18.5x and 17.9x PE to FY12E and FY13E earnings. We maintain our Hold recommendation on the stock with a target price of Rs 359 by assigning 20x PE to FY13E earnings," says KRChoksey research report.

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