Sun TV,-Ad revenue growth bounces back:: centrum,

Sun TV Network posted healthy 14.3%YoY growth in revenues on the
back of 20% YoY ad revenue growth along with 28% YoY growth in
analog subscription revenues. Digitisation in Chennai and
implementation of Phase-II will help the company grow its DTH and
analog subscription revenues. We maintain our BUY rating on the stock.
Q3FY13 above expectations: Revenues grew by 14.3% YoY to Rs4859mn
on the back of 20%YoY growth in advertising revenues and 27%YoY
growth in analog subscription revenues. Operating profit was up 10% YoY
to Rs3763mn as margins contracted by 279bps. Profitability was up by
13.1%YoY to Rs1899mn, 8.7% above expectations.
Healthy advertising growth: Advertisement revenues grew by 20%YoY
during the quarter on the back of strong festive season demand with
growth across sectors. We have modeled 8.8% growth for FY13 and 15%
for FY14E.
Subscription revenues to grow: On a sequential basis analog subscription
revenues grew by 8.8% and 28% YoY. On the back of strong DTH offtake, DTH
subscriber numbers have increased by 5% QoQ to 8.3mn and hence the
company posted 5% sequential growth in revenues. International
subscription revenues were flat on a sequential basis.

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Margins to remain stable: Margins during the quarter contracted by
279bps on the back of high admin & other expenditure (up 51% YoY) and
higher cost of revenues (up 34.7% YoY). However going forward we expect
margins to remain stable at ~77-78% on a standalone basis. Movie
acquisition cost will remain under Rs1bn for the next few quarters.
Radio business: In the radio business the company posted revenues of
Rs780mn in 9MFY13E with profits of ~Rs50mn. It will further bid in Phase-
III auctions when they are announced
Digitization benefits: Sun TV Network channels are expected to become
pay channels in Chennai city post digitization. The management is
expecting an ARPU of Rs25/month and believes that there are 2mn
households in Chennai of which 1.5mn are yet to get digitized. It is
expecting revenue of Rs20-25mn/month from this. For Phase-II, 5 key
cities in the 4 southern states are expected to get digitized accounting for
4mn households. The management expects revenue of Rs60-
70mn/month from these cities post digitization.
Maintain BUY: The stock is currently trading at 25x and 21x FY13E and
FY14E respectively. We value the stock at 23x Sept 2014 with a target price
of Rs512 and maintain BUY rating on the stock.