Shares of Sun TV Network tanked over 7 percent on February 10, weighed down by the company's disappointing quarterly earnings which saw margin pressure and a decline in advertising revenue.
The South India-based broadcaster reported a 20 percent on-year decline in net profit at Rs 363 crore for the December quarter, compared to Rs 453.9 crore in Q3 FY24. Revenue from operations also fell 10.4 percent to Rs 827.6 crore, down from Rs 923.2 crore in the year-ago period.
Advertisement revenue also contracted to Rs 332.17 crore, lower than the Rs 355.43 crore that was clocked in Q3 FY24. Meanwhile, declining ad revenue especially impacted the broadcasters operational performance as EBITDA margin sharply eroded to 53.7 percent in Q3 as compared to 63.8 percent in the year ago period.
At 09.38 am shares of Sun TV Network were trading at Rs 602.25 on the NSE.
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Looking ahead, analysts at Motilal Oswal Financial Services feels that the recent Star-Viacom merger poses a potential double whammy for Sun TV Network. The merger could intensify competition for advertising revenue in its core business and lead to a downward revision in IPL media rights during the next renewal cycle (from FY29), significantly impacting the valuation of SUN TV’s IPL franchise, Sunrisers Hyderabad (SRH), the brokerage said.
MOFSL also cut earnings estimates for FY25-26 have been by 6-7 percent, with a modest ~1 percent earnings CAGR projected over FY24-27 due to weaker ad revenue and higher production costs for Sun TV. "Currently, SUN TV trades at ~14x one-year forward P/E, compared to a 12x average P/E over the last five years, and the Star-Viacom merger could further contribute to a de-rating in its valuation multiples," MOFSL wrote.
In a similar move, Nuvama Institutional Equities also trimmed their FY26 and FY27 EPS estimates for Sun TV by 8.4 percent. This also prompted the firm to slightly lower its price target for the stock to Rs 955, even though it retained its 'buy' call.
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