11 September 2013
Annual Report Update | Sector: Media
Sun TV
BSE Sensex
19,997
S&P CNX
5,913
CMP: INR395
TP: INR515
Buy
DTH revenue and cost of revenues key monitorables
Improved radio performance and lower capital advances positives
Weak business momentum for the group DTH arm Sun Direct
Stock Info
Bloomberg
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
M.Cap. (INR b)
M.Cap. (USD b)
SUNTV IN
394.1
494/304
-8/-14/18
155.7
2.5
Subscription revenue from Sun Direct DTH declined 3% YoY to INR1.78b
implying fall in its contribution to 48% of Sun TV’s DTH revenue in FY13 vs 55%
in FY12. Overall DTH revenue for Sun TV grew 12% YoY indicating a strong 30%
YoY growth from other DTH operators. Business momentum for Sun Direct
likely remains weak as indicated by decline in revenue contribution as well as
lower advertising on Sun TV Network (down from INR264m in FY11 to INR97m
in FY12 and INR2m in FY13). Receivable days for revenue from Sun Direct has
increased from 118 days in FY11 to 200 days in FY12 and 205 days in FY13.
Financials & Valuation (INR b)
Y/E March
Net Sales
2013 2014E 2015E
18.2 22.1 25.8
15.8
7.7
19.5
12.2
80.7
24.1
47.5
54.0
20.3
4.9
9.5
2.7
18.6
9.5
24.1
24.0
90.4
26.7
50.6
51.8
16.4
4.4
7.8
3.2
Cost of revenue up 280bp YoY on lower mix of broadcast slot model
Cost of revenue increased 54% YoY to INR1.55b led by higher costs related to
program production and program rights. Contribution of programming based
on traditional model (vs the slot model used by Sun TV) has increased as
indicated by decline in broadcast fee and increase in contribution of advertising
revenue to the overall Ad & broadcast revenue.
EBITDA
13.8
Adj. Net Profit 6.8
Adj. EPS (INR) 17.3
Adj. EPS Gr. (%) -1.6
BV/Sh (INR)
73.4
RoE (%)
RoCE (%)
23.6
45.3
Increase in provision for doubtful debts on advertising revenue;
contingent liability up due to tax cases
Provision for doubtful debts increased ~11x YoY to INR244m (1.3% of revenue)
largely on advertising revenues. Contingent liabilities increased 78% YoY largely
due to disputes related to income-tax. Our interactions with the management
indicate that the company has subsequently won some of these cases making it
eligible for refunds with interest.
Div. Payout (%) 54.8
Valuations
P/E (x)
22.8
P/BV (x)
5.4
EV/EBITDA (x) 11.0
Div. Yield (%)
2.4
INR1.05b net cash outgo towards replacement of aircraft
Sun TV sold its existing aircraft for ~INR1.9b (~INR50m profit on sale) and
replaced it with another aircraft for a consideration of INR2.95b resulting in a
net cash outgo of ~INR1.05b. Sun TV depreciates the costs incurred towards
purchase of aircraft using the straight-line method based on estimate of useful
life of 15 years. This implies ~20m additional depreciation cost per year due to
aircraft replacement.
Shareholding pattern %
As on
Jun-13 Mar-13 Jun-12
Promoter
Dom. Inst
Foreign
Others
75.0
2.9
14.5
7.6
77.0
1.9
14.3
6.9
77.0
2.9
13.3
6.7
Improved performance in radio subsidiaries; decline in capital advances
likely reflecting lower movie advances
Performance of radio subsidiaries – Kal Radio and South Asia FM - improved
significantly with combined revenue growing ~25% YoY to INR1.13b and post-
minorities PAT of INR108.5m vs loss of INR65.4m in FY12. Capital advances
declined ~45% YoY to INR2.08b (vs 3x increase in FY12) likely reflecting lower
advances towards movie acquisition.
Stock Performance (1-year)
18% earnings CAGR; maintain Buy with a price target of INR515
The stock trades at P/E of 20.3x FY14E/16.4x FY15E and offers an FY14E
dividend yield of 2.7%. Maintain
Buy
with target price of INR515 based on 18x
FY15E EPS plus INR80/sh to incorporate 50% of potential digitization upside.
Shobhit Khare
(Shobhit.Khare@MotilalOswal.com); +91 22 3982 5428
Anil Shenoy
(Anil.Shenoy@MotilalOswal.com); +91 22 3029 5126
Investors are advised to refer through disclosures made at the end of the Research Report.

Sun TV
Related party disclosures indicate weak business momentum for
the group DTH arm Sun Direct
Subscription revenue from Sun Direct DTH declined 3% YoY to INR1.78b implying fall
in its contribution to 48% of Sun TV’s DTH revenue in FY13 vs 55% in FY12. Overall
DTH revenue for Sun TV grew 12% YoY indicating a strong 30% YoY growth from
other DTH operators. Business momentum for Sun Direct likely remains weak as
indicated by decline in revenue contribution as well as lower advertising on Sun TV
Network (down from INR264m in FY11 to INR97m in FY12 and INR2m in FY13). The
receivable days for revenue from Sun Direct has increased from 118 days in FY11 to
200 days in FY12 and 205 days in FY13.
Revenue from Sun direct declines 3% YoY
Subscription revenue from
Sun Direct DTH declined 3%
YoY to INR1.78b implying
fall in its contribution to
48% of Sun TV’s DTH
revenue in FY13 vs 55% in
FY12
Source: Company, MOSL
Overall DTH revenue growing considerable faster than Sun Direct DTH
Overall DTH revenue for
Sun TV grew 12% YoY
indicating a strong 30% YoY
growth from other DTH
operators
Source: Company, MOSL
Considerable decline in ad revenue from Sun Direct
Advertising revenue from
Sun Direct on Sun TV
Network
channels
decreased from INR 264m
in FY11 to INR 97m in FY12
and INR 2m in FY13
Source: Company, MOSL
11 September 2013
2

Sun TV
Receivable days from Sun Direct remains high
The receivable days for
revenue from Sun Direct
has increased from 118
days in FY11 to 200 days in
FY12 and 205 days in FY13
Cost of revenue up 260bp YoY on lower mix of broadcast slot
model
Cost of revenue increased 54% YoY to INR1.55b led by higher costs related to
program production and program rights. Contribution of programming based on
traditional model (vs the slot model used by Sun TV) has increased as indicated by
decline in broadcast fee and increase in contribution of advertising revenue to the
overall Ad & broadcast revenue.
Ad revenue contributed 88% of overall ad and broadcast revenue in FY13
Source: Company, MOSL
Ad revenue contribution
increased from 86% in FY12
to 88% in FY13 indicating a
lower mix of broadcast slot
model
Source: Company, MOSL
Broadcast revenue declined by 7%
Ad revenue grew by 10%
YoY; Broadcast revenue
decreased by 7% YoY
Source: Company, MOSL
11 September 2013
3

Sun TV
Cost of revenues up due to lower mix of broadcast slot model (INR m)
Ad revenue
Growth
Broadcast revenue
Growth
Total Revenue
Growth
Ad revenue contribution
Cost of revenues
As a % of revenue
Telecast costs
As a % of revenue
Program production expenses
Cost of program rights
Total programming cost
As a % of revenue
FY12
9545
-2%
1545.3
0%
17,574
-9%
54%
1007
5.7%
162
0.9%
307
189
496
2.8%
FY13
10497
10%
1433.0
-7%
18,176
3%
58%
1552
8.5%
258
1.4%
563
281
843
4.6%
Source: Company, MOSL
Increase in provision for doubtful debts on advertising revenue;
contingent liability up due to tax cases
Provision for doubtful debts increased ~11x YoY to INR243m (1.3% of revenue) largely
on advertising revenues. Contingent liabilities increased 78% YoY largely due to
disputes related to income-tax. Our interactions with the management indicate that
the company has subsequently won some of these cases making it eligible for refunds
with interest.
Details of provision for doubtful debt (INR m)
Total Receivables
Receivables exceeding 6 months
As a % of Total receivables
As a % of PBT
As a % of revenue
Receivables exceeding 6 months considered good
As a % of receivables exceeding 6 months
As a % of total receivables
As a % of PBT
As a % of revenue
Provision for doubtful receivables
As a % of receivables exceeding 6 months
As a % of total receivables
As a % of PBT
As a % of revenue
Provision during the year
As a % of PBT
As a % of revenue
FY09
2,247
376
16.7%
5.6%
3.6%
179
47.6%
8.0%
2.7%
1.7%
197
52.4%
8.8%
3.0%
1.9%
0
0.0%
0.0%
FY10
3,002
280
9.3%
3.2%
2.0%
46
16.5%
1.5%
0.5%
0.3%
234
83.5%
7.8%
2.7%
1.7%
37
0.4%
0.3%
FY11
FY12
FY13
3,881
4,649
5,353
374
365
693
9.6%
7.8%
12.9%
3.2%
3.6%
6.8%
1.9%
2.1%
3.8%
131
104
189
35.0%
28.4%
27.3%
3.4%
2.2%
3.5%
1.1%
1.0%
1.9%
0.7%
0.6%
1.0%
243
261
503
65.0%
71.6%
72.7%
6.3%
5.6%
9.4%
2.1%
2.5%
5.0%
1.3%
1.5%
2.8%
9
18
243
0.1%
0.2%
2.4%
0.0%
0.1%
1.3%
Source: Company, MOSL
11 September 2013
4

Sun TV
Contingent liability up 78% YoY due to tax cases
Source: Company, MOSL
INR1.05b net cash outgo towards replacement of aircraft
Sun TV sold its existing aircraft for ~INR1.9b (~INR50m profit on sale) and replaced it
with another aircraft for a consideration of INR2.95b resulting in a net cash outgo of
~INR1.05b. Sun TV depreciates the costs incurred towards purchase of aircraft using
the straight-line method based on estimate of useful life of 15 years. This implies
~20m additional depreciation cost per year due to aircraft replacement.
INR 1.05b cash outgo and incremental depreciation of INR20m due to aircraft replacement
INR m
Procurement price
Proceeds from sale of aircraft
Gain on Sale of aircraft (estimated)
Cash inflow/(outflow)
Net Cash inflow/(outflow)
Estimated useful life (years)
Annual depreciation
Incremental annual depreciation
Previous aircraft
2,641
1,900
50
1,900
-1,045
15
176
New Aircraft
2,945
-2,945
15
196
20
Source: Company, MOSL
11 September 2013
5

Sun TV
Improved performance in radio subsidiaries; decline in capital advances
likely reflecting lower movie advances
Performance of radio subsidiaries – Kal Radio and South Asia FM - improved
significantly with combined revenue growing ~25% YoY to INR1.13b and post-
minorities PAT of INR108.5m vs loss of INR65.4m in FY12. Capital advances
declined ~45% YoY to INR2.08b (vs 3x increase in FY12) likely reflecting lower
advances towards movie acquisition.
Improved performance in radio subsidiaries
Source: Company, MOSL
Capital advances decline significantly (INR m)
Source: Company, MOSL
11 September 2013
6

Sun TV
Financials and valuation
11 September 2013
7

Sun TV
Financials and valuation
11 September 2013
8

Sun TV
NOTES
11 September 2013
9

Sun TV
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11 September 2013
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10