sun tv, 25th january

7/29/2019 SUN TV, 25th January

1/11

Please refer to important disclosures at the end of this report 1

EBITDA 376 341 10.3 329 14.4

OPM (%) 77.5 80.2 (279)bp 75.9 153bp

Source: Company, Angel Research

For 3QFY2013, Sun TV Network Ltd (STNL) reported a 14.3% yoy growth in its

top-line to `486cr. The healthy top-line performance was driven by a robust

20.1% yoy growth in its advertising revenue to `293cr (on the back of all round

increase in ad revenue across key sectors aided by festive season). Although the

OPM contracted by 279bp yoy to 77.5%, net profit grew by 13.1% yoy to `190cr.

Sun TV registered a 16.4% yoy increase in subscription revenue to `132cr mainly

on account of a 12.5% yoy growth in the DTH segment to `95cr and 27.6% yoy

growth in Analogue segment to `37cr (aided by`7.5cr from Arasu deal). The

management expects to maintain healthy growth in subscription revenue aided by

2nd phase of digitalization in its key markets of Bangalore, Hyderabad, Mysore,

Coimbatore and Visakhapatnam (with 4.5mn potential digital subscribers).

Among other segments, international revenue grew by 8.3% yoy to `26cr while

broadcast fee declined 17.1% yoy to `34cr.

Sun TV is expected to be among key beneficiaries of

mandatory digitization due to its strong presence in South India. At the current

market price, STNL is trading at 21.2x FY2014E consolidated EPS of `20.7. We

believe the stock is fairly valued and would prefer to wait for a better entry

opportunity.

% chg 38.6 (8.3) 5.1 15.2

% chg 48.2 (10.0) 0.9 16.8

EBITDA margin (%) 78.4 76.6 76.9 77.3

P/E (x) 22.5 25.0 24.7 21.2

P/BV (x) 7.7 6.9 6.3 5.6

RoE (%) 36.8 28.7 26.3 27.7

RoCE (%) 49.1 36.8 35.6 38.4

EV/Sales (x) 8.3 9.2 8.6 7.4

EV/EBITDA (x) 10.6 12.0 11.1 9.6


CMP `439

Target Price -

Investment Period -

Stock Info

Sector

Net Debt (` cr) (490)

Bloomberg Code SUNTV.IN

Shareholding Pattern (%)

Promoters 77.0

MF / Banks / Indian Fls 2.2

FII / NRIs / OCBs 13.8

Indian Public / Others 7.0

Abs. (%) 3m 1yr 3yr

Sensex 7.0 19.5 18.8

SUNTV 23.4 57.8 15.5

Reuters Code SUNTV.BO

BSE Sensex 20,027

Nifty 6,054

Avg. Daily Volume 154,582

Face Value (`) 5

Beta 0.7

52 Week High / Low 449/177

Media

Market Cap (` cr) 17,308

022-39357800 Ext: 6839

[email protected]

Performance Highlights

3QFY2013 Result Update | Media

January 23, 2013


2/11

SUN TV Network | 3QFY2013 Result Update

January 23, 2013 2

Exhibit 1:Quarterly performance (Standalone)

Cost of Revenue 34 25 34.7 34 0.1 108 72 49.9(% of sales) 7.0 5.9 7.8 24.9 16.6

Staff cost 48 40 18.2 43 11.0 133 126 5.6

(% of sales) 9.8 9.5 9.9 30.6 29.0

Other expenditure 28 19 51.0 28 1.7 76 60 26.3

(% of sales) 5.8 4.4 6.4 17.6 13.9

OPM (%) 77.5 80.2 75.9 237.3 247.5

Depreciation & Amortization 104 112 (7.2) 114 (8.3) 311 336 (7.3)

EBIT (%) 56.0 53.8 49.7 165.4 169.9

Interest 1.7 3.6 (53.9) 1 234.0 2 5 (48.6)

Other Income 11 23 (54.5) 10 9.8 33 59 (43.5)

Ext Income/(Expense) - - - - -

(% of Sales) 57.8 58.4 51.8 55.6 59.4

Provision for Taxation 91 80 13.1 73 25.2 242 255 (5.2)

(% of PBT) 32.4 32.4 32.4 32.4 32.3

PATM (%) 39.1 39.5 35.0 37.6 40.3

Equity shares (cr) 39 39 39 39 39



3/11


January 23, 2013 3

Top-line growth led by robust 20.1% yoy growth in advertising

revenue

During 3QFY2013, STNLs top-line grew by 14.3% yoy to `486cr driven by robust

20.1% yoy growth in its advertising revenue to `293cr (on the back of all round

increase in ad revenue across key sectors aided by festive season). The company

registered 16.4% yoy increase in subscription revenue to `132cr mainly on account

of 12.5% yoy growth in DTH segment to `95cr and 27.6% yoy growth in Analogue

segment to `37cr (aided by`7.5cr from Arasu deal). The management expects to

maintain healthy growth in subscription revenue aided by 2nd phase of

digitalization in its key markets of Bangalore, Hyderabad, Mysore, Coimbatore

and Visakhapatnam (with 4.5mn potential digital subscribers). Among other

segments, international revenue grew by 8.3% yoy to `26cr while broadcast fee

declined 17.1% yoy to `34cr.

Exhibit 2:Top-line grows 14.3% yoy


Exhibit 3:Segmental revenue


598

461

454

451

425

427

426

433

486

51

18

3 6

(29)

(7) (6)

(4)

14

(40)

(30)

(20)

(10)

-

10

20

30

40

50

60

-

100

200

300

400

500

600

700

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

(%)

(`cr)

Top-line (LHS) yoy growth (RHS)

261

5370

2042

293

37

95

26 34

-

50

100

150

200

250

300

350

Advertisement Analog Subs. DTH Subs. InternationalSubs.

Broadcast fees

(`cr)

3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1QFY13 2QFY13 3QFY13


4/11


January 23, 2013 4

Exhibit 4:Revenue break-upAdvt. Income 293 244 20.1 245 19.8

Broadcast Fee 34 41 (17.1) 37 (8.11)Program License Inc (Int. Rev) 26 24 8.3 26 -

Subs Income Analogue 37 29 27.6 34 8.8

Subs Income DTH 95 84 12.5 90 5.0

Others (Incl. Movies) 1 3 (53.3) 2 (22.2)

Advt. Income

Broadcast Fee 60.3 57.4 - 56.4 -

Program License Inc (Int Rev) 7.0 9.6 - 8.5 -

Subs Income Analogue 5.4 5.6 - 6.0 -

Subs Income DTH 7.6 6.8 - 7.8 -

Others (Incl. Movies) 19.4 19.8 - 20.8 -


Net Profit grows 13.1% yoy in spite of 279bp yoy OPM

contraction

The OPM for the quarter stood at 77.5%, a decline of 279bp yoy, largely on the

back of 105bp yoy increase in cost of revenues to 7.0% of sales and 141bp yoy

increase in other expenditure to 5.8% of sales. Staff costs as a percentage of sales

also inched up by 33bp yoy to 9.8%. Staff costs stood at `48cr in 3QFY2013

against `40cr in 3QFY2012. In spite of margin pressure, net profit grew by 13.1%

yoy to `190cr.

Exhibit 5:OPM contracts 279bp yoy


Exhibit 6:PAT grows by 13.1% yoy


83.979.0 80.6 81.0 80.2 76.9 75.9 75.9 77.5

8.0 9.8 9.7 9.2 9.5 9.0 9.9 9.9 9.8

-

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

(%)

OPM Staff cost (% of sales)

225

208

188

180

168

159

164

152

190

4826 10

8 (26)(24) (12)

(16)

13

(30)

(20)

(10)

-

10

20

30

40

50

60

-

50

100

150

200

250

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

(%)

(`cr)

PAT (LHS) yoygrowth (RHS)


5/11


January 23, 2013 5

Investment arguments

The second phase of digitization across 38 cities has

started, the deadline for which is March 31, 2013. In this second phase, Sun TV

has presence in five key cities: Bangalore, Hyderabad, Mysore, Coimbatore and

Visakhapatnam with 4.5mn potential digital subscribers. The digitization drive

across the nation and consumers shifting to superior-quality DTH/DAS from cable

television is expected to plug distribution loopholes and lead to higher ARPUs for

broadcasters. STNL, a leading broadcaster in the south Indian states of Tamil

Nadu, Andhra Pradesh, Karnataka and Kerala is likely to be among the key

beneficiaries from mandatory digitization.

Outlook and valuation

Sun TV is expected to be among key beneficiaries of mandatory digitization due to

its strong presence in South India. At the current market price, STNL is trading at

21.2x FY2014E consolidated EPS of `20.7. We believe the stock is fairly valued

and would prefer to wait for a better entry opportunity.


6/11


January 23, 2013 6

Exhibit 7:Peer valuation

Zee Ent.* Unrated 21,510 235 - - 32.1 27.0 5.8 5 18.8 19.7 17.0 17.6

Source: Company, Angel Research, *Bloomberg estimates, #CAGR over FY201214E

Exhibit 8:Angel vs Consensus estimatesAngel estimates 1,942 2,237 Angel estimates 17.8 20.7

Consensus 1,941 2,296 Consensus 17.9 20.7

Diff (%) 0.1 (2.6) Diff (%) (0.6) (0.2)


Exhibit 9:Return of Sun TV vs Sensex


Exhibit 10:One-year forward P/E band


Company background

STNL is a leading broadcaster in the south Indian states of Tamil Nadu, Andhra

Pradesh, Karnataka and Kerala. The company is promoted by Kalanithi Maran.

The group is present across the media value chain, viz broadcasting, radio, films,

cable distribution, DTH and print media. STNL has the largest broadcastingnetwork in South India, with 20 channels in the GEC, kids, movies and news

space. Besides TV broadcasting, STNL owns FM radio licenses for 45 cities. STNL

has a strong movie library comprising more than 8,500 titles, with rights across all

the four major south Indian languages. Apart from having an extensive movie

library, STNL purchases around 90% of all movie releases in these languages.

0%

20%

40%

60%

80%

100%

120%

140%

Apr-10

Jun-1

0

Aug-1

0

Oct-10

Dec-1

0

Feb-1

1

Apr-11

Jun-1

1

Aug-1

1

Oct-11

Dec-1

1

Feb-1

2

Apr-12

Jun-1

2

Aug-1

2

Oct-12

Dec-1

2

Sensex SUN TV

0

100

200

300

400

500

600

Oct-10

Dec-1

0

Feb-1

1

Apr-11

Jun-1

1

Aug-1

1

Oct-11

Dec-1

1

Feb-1

2

Apr-12

Jun-1

2

Aug-1

2

Oct-12

Dec-1

2

SharePrice(`)

14x 17x 20x 23x


7/11


January 23, 2013 7

Profit & Loss Statement (Consolidated)

Less: Excise duty - - - - - -Net Sales 1,039 1,453 2,013 1,847 1,942 2,237

% chg 19.5 39.8 38.6 (8.3) 5.1 15.2

(Inc.)/ Dec. in stock in trade - 4 8 8 - -

Cost of Production 111 119 135 133 145 156

Staff Costs 116 134 192 186 194 226

Power & Fuel 14 14 7 7 8 11

Other Expenses 62 91 94 99 100 114

% chg 23.3 - - - - -

(% of Net Sales) 70.9 75.1 78.4 76.6 76.9 77.3

Depreciation& Amortisation 220 321 480 474 499 549

% chg 9.0 49.1 42.6 (14.3) 5.7 18.7

(% of Net Sales) 49.7 53.0 54.5 50.9 51.2 52.8

Interest & other Charges 14 5 2 6 5 6

Other Income 67 35 49 80 47 45

(% of PBT) 11.7 4.4 4.3 7.8 4.6 3.7

Share in profit of Associates 0.2 0.8 3.5 7.9 7.0 7.0

% chg 10.9 40.5 43.1 (11.3) 2.2 17.6

Prior Period & Extra Exp/(Inc.) - - - - - -

Tax 229 299 383 332 346 411

(% of PBT) 40.3 37.4 33.5 32.7 33.4 33.7

Add: Share of earn of asso. - - - - - -

Less: Minority interest (MI) (28) (18) (6) (2) (2) (2)

% chg 12.7 41.2 48.2 (10.0) 0.9 16.8

(% of Net Sales) 35.4 35.8 38.3 37.5 36.0 36.5

% chg 12.7 41.2 48.2 (10.0) 0.9 16.8


8/11


January 23, 2013 8

Balance Sheet (Consolidated)

Equity Share Capital 197 197 197 197 197 197Preference Capital - 88 93 93 93 93

Reserves& Surplus 1,505 1,689 2,057 2,315 2,549 2,901

Minority Interest 38 37 32 29 29 29

Total Loans 72 0 13 11 - -

Deferred Tax Liability 26 34 41 34 34 34

Net Block (incl. CWIP) 972 1,213 1,307 1,251 1,198 1,279

Investments 181 228 185 193 263 383

Non Current Assets 23 30 - - - -

Current Assets 881 1,035 1,374 1,464 1,891 2,109

Cash 365 437 603 308 665 726

Loans & Advances 274 266 254 616 602 694

Other 241 332 517 541 624 690

Current liabilities 219 461 435 229 449 516

Mis. Exp. not written off 0 0 0 - - -

Note: FY12 balance sheet numbers as per revised schedule VI


9/11


January 23, 2013 9

Cash Flow Statement (Consolidated)

Profit before tax 569 800 1,145 1,015 1,037 1,220

Depreciation 220 321 480 474 499 549Change in Working Capital 56 (109) (173) (140) (53) (93)

Interest / Dividend (Net) (26) (29) (36) (53) (36) (35)

Direct taxes paid 202 281 383 (332) (346) (411)

Others 30 24 86 (70) 10 11

(Inc.)/ Dec. in Fixed Assets (494) (554) (554) (406) (447) (630)

(Inc.)/ Dec. in Investments (9) (47) 43 (263) (70) (120)

Issue of Equity 6 107 11 2 2 2

Inc./(Dec.) in loans (4) (73) 17 (3) (11) -

Dividend Paid (Incl. Tax) (184) (115) (505) (572) (265) (466)

Interest / Dividend (Net) 8 29 36 53 36 35

Inc./(Dec.) in Cash (28) 71 166 (295) 357 61


10/11


January 23, 2013 10

Key Ratios

P/E (on FDEPS) 47.0 33.3 22.5 25.0 24.7 21.2P/CEPS 42.5 29.4 20.4 21.8 21.3 18.4

P/BV 10.2 9.2 7.7 6.9 6.3 5.6

Dividend yield (%) 0.6 1.7 2.0 2.2 2.3 2.3

EV/Sales 16.0 11.5 8.3 9.2 8.6 7.4

EV/EBITDA 22.6 15.3 10.6 12.0 11.1 9.6

EV / Total Assets 9.1 8.1 6.8 6.2 5.7 5.1

EPS (Basic) 9.3 13.2 19.6 17.6 17.8 20.7

EPS (fully diluted) 9.3 13.2 19.6 17.6 17.8 20.7

Cash EPS 10.3 14.9 21.5 20.2 20.6 23.9

DPS 2.5 7.5 8.8 9.5 10.1 10.1

Book Value 43.2 47.8 57.2 63.7 69.7 78.6

EBIT margin 49.7 53.0 54.5 50.9 51.2 52.8

Tax retention ratio 0.6 0.6 0.7 0.7 0.7 0.7

Asset turnover (x) 0.8 0.9 0.9 0.6 0.6 0.6

RoIC (Post-tax) 24.6 28.5 31.5 21.5 19.9 21.0

Cost of Debt (Post Tax) 0.1 0.1 0.2 0.3 0.6 -

Leverage (x) 0.4 0.2 0.0 0.1 0.0 -

Operating RoE 33.3 33.7 32.6 22.7 20.4 -

RoCE (Pre-tax) 30.2 39.7 49.1 36.8 35.6 38.4

Angel RoIC (Pre-tax) 45.7 57.6 72.6 49.2 47.9 57.3

RoE 21.6 27.9 36.8 28.7 26.3 27.7

Asset Turnover (Gross Block) 0.7 0.8 0.7 0.6 0.6 0.6

Inventory / Sales (days) 0 1 0 0 0 0

Receivables (days) 85 83 86 108 111 111

Payables (days) 16 10 10 9 8 8

WC (ex-cash) (days) 104 34 61 183 146 142

Net debt to equity 0.4 0.0 0.1 0.1 - -

Net debt to EBITDA 0.1 0.0 0.0 0.0 - -

Int. Coverage (EBIT / Interest) 37.4 155.9 488.0 161.7 198.9 196.9


11/11


January 23, 2013 11

Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com

This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investmentdecision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make

such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies

referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and

risks of such an investment.

Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make

investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this

document are those of the analyst, and the company may or may not subscribe to all the views expressed within.

Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and

trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's

fundamentals.

The information in this document has been printed on the basis of publicly available information, internal data and other reliablesources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as thisdocument is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any wayresponsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report .Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify,nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. WhileAngel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory,compliance, or other reasons that prevent us from doing so.

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Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in

connection with the use of this information.

Disclosure of Interest Statement SUN TV

1. Analyst ownership of the stock No

2. Angel and its Group companies ownership of the stock No

3. Angel and its Group companies' Directors ownership of the stock No

4. Broking relationship with company covered No

Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)Reduce (-5% to -15%) Sell (< -15%)

Note: We have not considered any Exposure below`

1 lakh for Angel, its Group companies and Directors

sun tv, 25th january

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