4QFY17 Results Update | Sector: Media
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INRm
Free float (%)
Ad growth disappoints, volumes recovery a quarter away
Maintain EPS and TP
318.6 / 4.8
773 / 312
Revenue misses estimate largely led by ad miss:
4QFY17 PAT was flat YoY at
INR2.36b (est. of INR2.46b). The PAT miss was lower than the operational
miss, as lower depreciation, higher-than-expected other income and lower
tax outgo partially cushioned the EBITDA disappointment. Revenue of
Financials & Valuations (INR b)
INR5.82b (+3% YoY/-1% QoQ) came in 5% below our estimate of INR6.12b,
primarily due to lower-than-expected ad revenue and digital cable revenue.
Demon continues to hurt ad volumes; subscription misses estimate too:
inventory consumption continued to take a beating from demonetization as
advertisers across categories were yet to loosen their purses. This, coupled
with SUNTV’s focus of improving ad yields, kept pressure on ad volumes.
Since the note-ban drive, SUNTV is estimated to have lost ~2.5-2.7m seconds
in ad volumes. Ad & broadcast revenue fell ~7% YoY to INR2.92b (est. of
INR3.16b). Subscription revenue grew 13% YoY/1% QoQ to INR2.44b (3%
below est. of INR2.51b). Cable declined 3% QoQ to INR0.73b (est. of
INR0.81b), while DTH grew 2.4% QoQ to INR1.71b (in-line).
Lower movie amortization/higher other income partially cushion
SUNTV reined in movie investments to ~INR0.62b in
4QFY17 (v/s INR0.97b in 3QFY17). It also guided for lower movie
investments of INR3-3.25b (v/s ~INR3.4b in FY17). Contained depreciation
and movie-related amortization, coupled with higher-than-expected other
income, partially offset the impact of negative operating leverage. Escalation
in content cost was largely a function of new program launches and the shift
to commissioned model of content making.
Earnings estimates largely maintained:
While SUNTV improved viewership
share in AP and held on to ratings in flagship channel Sun TV, sustenance of
the same is yet to be established. We model 24% EPS CAGR over FY17-19E.
We largely maintain FY18E/FY19E EPS and TP of INR860, based on P/E of 22x
FY19E EPS. SUNTV trades at 27.4x FY18E EPS and 21.4x FY19E EPS.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
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