Estimate change
TP change
Rating change
Motilal Oswal values your support in the
Asiamoney Brokers Poll 2021 for India
Research, Sales, Corporate Access and
Trading team. We
request your ballot.
CMP: INR531
TP: INR620 (+17% )
Buy
Sharp cost savings in a weak environment aid earnings
Sun TV Network
12 June 2021
4QFY21 Results Update | Sector: Media
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
SUNTV IN
394
209.2 / 2.9
571 / 368
-4/-1/-18
1440
Sun TV Network (SUNTV)’s EBITDA, up 9% YoY, was largely in-line as costs
were kept in check in a modest revenue growth environment. The dividend
payout fell sharply to just INR5/share, the lowest since FY10 (v/s
INR25/share in FY20), despite strong cash reserves.
Given the impact of the second COVID wave, we cut our FY22E EBITDA/PAT
estimates by 9%/6%, but maintain our FY23E estimates. We see the
delayed investment in OTT as a key risk that could dilute its competitive
position. However, viewership improvement in linear TV and low valuations
offer support. Maintain Buy.
SUNTV’s 4QY21 revenues increased 6% YoY to INR7.8b (in-line), with
subscription revenue up 7% YoY to INR4.3b. Advertisement revenues grew
8% YoY.
Production costs were up 23% YoY on the low base of 4QFY20. However,
tight cost measures in employee/SG&A (down 8%/17%) kept the overall
operating cost flattish (up just 1.5%).
EBITDA subsequently improved 9% YoY to INR5.5b (in-line); EBITDA margins
stood at 69.9% (up 140bps YoY).
Net profits were flattish (up 2% YoY) at INR4.5b (6% above estimate) on
account of lower-than-expected tax, partly offset by higher depreciation
and interest cost.
Ad revenue growth is expected to recover by 2QFY22 and double-digit
subscription revenue growth is estimated in FY22.
It is estimated to invest a total of INR10–12b in movie production over the
next two years, with some big-ticket projects and 6–8 fiction shows lined up
for release as the market opens up.
Capex of INR2–2.5b is commissioned for FY22 towards procuring satellite
rights.
The company is not planning aggressive movie acquisitions for OTTs, like
other players, which have borne the brunt of sub-optimal returns.
Subscription revenue is expected to grow in the double digits in FY22E, led
by digitization trends, along with a rise in OTT subscriptions. Viewership
trends are yet to see a steady uptick.
Plans to launch new TV shows / movies and a Marathi channel in FY22 have
been delayed given the second COVID wave. However, the most concerning
factor is the delayed OTT investment – besides monetizing the existing
library, the company has not made any material inroads in the space.
Furthermore, it has curbed the dividend payout to just INR5/share, the
lowest since FY10.
Ads and subscriptions grow prior to second wave impact
Financials & Valuations (INR b)
INRb
FY21 FY22E FY23E
Sales
EBITDA
Adj. PAT
EBITDA Margin (%)
Adj. EPS (INR)
EPS Gr. (%)
BV/Sh. (INR)
Ratios
Net D:E
RoE (%)
RoCE (%)
Payout (%)
Valuations
P/E (x)
P/B (x)
EV/EBITDA (x)
Div . Yield (%)
FCF Yield (%)
31.2
20.7
15.2
66.3
38.6
10.8
176.3
-0.7
24.2
24.5
15.0
13.8
3.0
8.2
0.9
7.1
34.2
22.8
14.8
66.7
37.6
-2.5
185.1
-0.8
20.8
20.9
76.8
14.1
2.9
8.4
4.7
9.8
38.5
25.3
16.3
65.6
41.4
10.0
197.6
-0.8
21.6
21.7
69.8
12.9
2.7
6.1
4.7
9.4
Highlights from management commentary
Valuation and view
Shareholding pattern (%)
As On
Mar-21
Dec-20
Promoter 75.0
75.0
DII
4.1
5.0
FII
9.0
9.4
Others
12.0
10.5
FII Includes depository receipts
Mar-20
75.0
7.2
9.0
8.8
Research Analyst: Aliasgar Shakir
(Aliasgar.Shakir@motilaloswal.com)
Research Analyst: Suhel Shaikh
(Suhel.Ahmad@MotilalOswal.com)
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.