Neutral Sun TV Network; target of Rs 630: Motilal Oswal

Motilal Oswal's research report on Sun TV Network

Sun TV Network (SUNTV) reported another weak result, with revenue declining ~2% YoY, primarily due to persistent weakness in ad revenue (down 13% YoY). EBITDA declined 16% YoY, impacted by the continued weakness in ad revenue and higher production costs. FY25 was a subdued year for SUNTV, with revenue declining 7%, primarily due to persistent weakness in ad revenue, while EBITDA dipped 19% YoY. Recovery in ad revenue remains the key near-term monitorable. However, we continue to believe that the Star-Viacom merger is a potential double whammy for SUNTV due to: 1) higher competition from deep-pocketed players for ad revenue in the core business and 2) the potential downward revision of IPL media rights in the next renewal cycle (from FY29), which could significantly impact the valuation of SUNTV’s IPL franchise (SRH). We cut our FY26-27E EBITDA by 4% each on account of lower ad revenue, while our earnings remain broadly unchanged, as lower EBITDA is offset by higher other income. We expect ~5% earnings CAGR over FY25-27.

Outlook

We value SUNTV on SoTP; we assign 6x FY27 EV/sales for the Sports franchise, ~5x EV/EBITDA for the core TV business, and 1x to cash holding and potential dividends of INR102b to arrive at our unchanged TP of INR630 (implying ~13x FY27 P/E). We reiterate our Neutral rating.