Neutral Sun TV Network; target of Rs 670: Motilal Oswal

Motilal Oswal's research report on Sun TV Network

Sun TV Network (SUNTV) reported a largely in-line 2QFY25, with revenue/EBITDA declining 12%/26% YoY (on a high base). A modest 2% YoY recovery in ad revenue (vs. -5% YoY in 1Q, -8% YoY for Zee) was offset by lower movie production revenue, higher direct costs and other expenses. Recovery in ad revenue remains the key near-term monitorable. However, we believe the impending Star-Viacom merger could be a potential double whammy for SUNTV due to: 1) higher competition from deep-pocketed player for ad revenue in the core business and 2) potential downward revision in IPL media rights in the next renewal cycle (from FY28), which would significantly impact SUNTV’s IPL franchise (SRH). Our FY25-26 earnings estimates are broadly unchanged. We build in a revenue/EBITDA CAGR of ~4% over FY24-27, with core business recording 5%/8% revenue/EBITDA CAGR.

Outlook

SUNTV trades at ~15x one-year forward P/E (vs. 12x average PE in last 5 years). We believe the impending Star-Viacom merger could lead to a derating. We maintain our Neutral rating with a revised TP of INR670, based on 10x Dec’26 EV/Sales for sports, 8x Dec’26 EV/EBITDA for core TV business, and INR92b cash holdings.

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