Buy Sun TV Network; target of Rs 690: Motilal Oswal
Motilal Oswal’s research report on Sun TV Network
Movies and IPL revenues cushion TV business: SUNTV reported a weak quarter due to muted ad/subscription revenue growth. Standalone revenue growth came in at strong 24% YoY to INR8.9b (9% beat), primarily due to revenue from movies (INR1.1b) and the IPL (INR0.6b). Consequently, EBITDA grew 16% YoY to INR6.1b (3% beat); margins, however, contracted 440bp YoY to 68.4% impacted by high production cost and IPL related increase in SG&A. But, movie amortization cost pulled down PAT to INR2.8b, -2% YoY (23% miss). For FY19, revenue/EBITDA/PAT grew 28%/31%/28%.
We have lowered our TP to INR690 (prior: INR740), ascribing 15x (~30% discount to three-year average) to FY21 EPS. We believe, till the time the flux gets settled, impact from TRAI’s tariff order along with mounting pressure on viewership share and margins, warrants a discount to the average multiple. Yet, the current price largely captures the negatives. Maintain Buy.
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