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Sun TV Network (SUTV.BO)
Neutral Equity Research
More bad news before good? Risk-reward still not favorable
What's changed
We remain Neutral on Sun TV after our discussions with management.
Key takeaways: 1) Mgmt stated that the uptake on ad-spends in the runup
to Diwali has been slower than usual on top of a general economic
slowdown. 2) While mgmt expects Sun TV’s DTH subscription rev to show
healthy growth, it expects its analog rev. to show muted growth in 2Q/3Q,
led by lower monthly rentals of Rs70-100 (vs. Rs120-Rs200 earlier) post
launch of Arasu TV in Sep 2011. Mgmt expects the cabinet acceptance of
cable TV digitization ordinance (on Oct-13) to boost its analog revenues by
2X-3X in the longer term. 3) Mgmt said that despite a muted rev uptake, it
expects margins to remain stable, driven by effective cost control. 4)
Management indicated that it will go ahead with the planned launches this
FY and expects to launch 5-6 new channels by end-FY12.
Implications
We reduce our 12E/13E/14E EPS estimates by 11.6%/13.0%/14.0% to
Rs19.09/22.64/26.42, as we factor in the weaker growth outlook.
Accordingly, we reduce our 12-m DCF based TP to Rs300 (from Rs370). We
believe the weaker growth outlook is yet to be factored in by consensus
(evidenced by the modest downward revisions of Bloomberg consensus).
Our FY12E/13E EPS est. are 8.8%/5.9% below consensus. In addition, we
may not see any material re-rating of the stock in the near term as the
street may wait to see the full-impact from Arasu TV’s service launches
and from any potential unfavorable court rulings related to the CBI
investigation of the promoter and Sun TV’s group companies.
Valuation
At FY13E PE/EV-EBITDA of 12.2X/5.4X we find Sun TV fairly valued, given
the NT slowdown in rev, increased competition and regulatory overhang.
Key risks
Upside: faster economic recovery. Downside: higher competitive intensity.
INVESTMENT LIST MEMBERSHIP
Neutral
Coverage View: Neutral
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sun TV Network (SUTV.BO)
Neutral Equity Research
More bad news before good? Risk-reward still not favorable
What's changed
We remain Neutral on Sun TV after our discussions with management.
Key takeaways: 1) Mgmt stated that the uptake on ad-spends in the runup
to Diwali has been slower than usual on top of a general economic
slowdown. 2) While mgmt expects Sun TV’s DTH subscription rev to show
healthy growth, it expects its analog rev. to show muted growth in 2Q/3Q,
led by lower monthly rentals of Rs70-100 (vs. Rs120-Rs200 earlier) post
launch of Arasu TV in Sep 2011. Mgmt expects the cabinet acceptance of
cable TV digitization ordinance (on Oct-13) to boost its analog revenues by
2X-3X in the longer term. 3) Mgmt said that despite a muted rev uptake, it
expects margins to remain stable, driven by effective cost control. 4)
Management indicated that it will go ahead with the planned launches this
FY and expects to launch 5-6 new channels by end-FY12.
Implications
We reduce our 12E/13E/14E EPS estimates by 11.6%/13.0%/14.0% to
Rs19.09/22.64/26.42, as we factor in the weaker growth outlook.
Accordingly, we reduce our 12-m DCF based TP to Rs300 (from Rs370). We
believe the weaker growth outlook is yet to be factored in by consensus
(evidenced by the modest downward revisions of Bloomberg consensus).
Our FY12E/13E EPS est. are 8.8%/5.9% below consensus. In addition, we
may not see any material re-rating of the stock in the near term as the
street may wait to see the full-impact from Arasu TV’s service launches
and from any potential unfavorable court rulings related to the CBI
investigation of the promoter and Sun TV’s group companies.
Valuation
At FY13E PE/EV-EBITDA of 12.2X/5.4X we find Sun TV fairly valued, given
the NT slowdown in rev, increased competition and regulatory overhang.
Key risks
Upside: faster economic recovery. Downside: higher competitive intensity.
INVESTMENT LIST MEMBERSHIP
Neutral
Coverage View: Neutral
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