ICICI Direct recommended hold rating on Sun TV with a target price of Rs 605 in its research report dated February 11, 2019.
ICICI Direct's research report on Sun TV
Sun TV’s Q3FY19 performance was strong on the topline front but margins were lower on account of commissioning of news shows Revenues came in at Rs 904.45 crore (up 32% YoY). Ad revenues were up 13% YoY at Rs 382 crore, better than our estimate of 10% YoY growth. Subscription revenues were at Rs 350 crore (24.1% YoY growth vs. estimated growth of 21.5% YoY). The company booked Sarkar movie theatrical revenues of ~Rs 108 crore, during the quarter EBITDA came in at Rs 667 crore, up 35.6% YoY. EBITDA margin was lower at 73.8% on account of higher operating/production expenses for launch of new shows across languages The company reported a profit of Rs 351.0 crore. Sun TV has declared an interim dividend of Rs 2.5 per share, in addition to Rs 7.5 per share dividend declared during FY19, so far.
We are, however, enthused by Sun’s focus on OTT segment and benefits of the same over medium to long term could be seen. We roll over our valuations to FY21E and value the company at Rs 605/share (15x FY21 EPS) with a HOLD rating.
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