Ad rate hike to boost revenues
Sun TV Network’s results for Q4FY13 were above our expectations. The company reported 10.7%YoY growth in revenues, 311bps fall in EBIDTA margin and 11.6%YoY increase in net profit. Sales growth momentum continued on the back of 14.6%YoY increase in ad growth while DTH and analog subscription revenues grew by 6%QoQ and 2.7%QoQ respectively. We maintain a Buy rating for the scrip with a revised target price of Rs487 (20x FY15 EPS).
Q4FY13 results above expectations: Revenues grew by 10.7% YoY to Rs4727mn on the back of 14.6%YoY growth in advertising revenues and 22.6%YoY growth in analog subscription revenues. Operating profit was up 6.2% YoY to Rs3486mn as margins contracted by 311bps. Profitability was up by 11.6%YoY to Rs1775mn, 5.5% above expectations.
Strong advertising growth: Advertisement revenues grew by 14.6%YoY during the quarter on the back of volume growth across channels. The weekday Prime Time advertisement rates (6 out of 9 Half-hour slots daily) on flagship channel Sun TV are being increased by 19% with effect from 15 July, 2013. Further rate hikes in other channels could happen before the start of the festive season. Management expects double digit ad growth for FY14.
Subscription revenues to grow: On a sequential basis analog subscription revenues grew by 2.7% and 22.6% YoY. On the back of strong DTH offtake due to Phase-II digitization, DTH subscriber numbers increased by 4.3% QoQ to 8.63mn and hence the company posted 6% sequential growth in revenues. International subscription revenues were flat on a sequential basis.
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Sun TV Network’s results for Q4FY13 were above our expectations. The company reported 10.7%YoY growth in revenues, 311bps fall in EBIDTA margin and 11.6%YoY increase in net profit. Sales growth momentum continued on the back of 14.6%YoY increase in ad growth while DTH and analog subscription revenues grew by 6%QoQ and 2.7%QoQ respectively. We maintain a Buy rating for the scrip with a revised target price of Rs487 (20x FY15 EPS).
Q4FY13 results above expectations: Revenues grew by 10.7% YoY to Rs4727mn on the back of 14.6%YoY growth in advertising revenues and 22.6%YoY growth in analog subscription revenues. Operating profit was up 6.2% YoY to Rs3486mn as margins contracted by 311bps. Profitability was up by 11.6%YoY to Rs1775mn, 5.5% above expectations.
Strong advertising growth: Advertisement revenues grew by 14.6%YoY during the quarter on the back of volume growth across channels. The weekday Prime Time advertisement rates (6 out of 9 Half-hour slots daily) on flagship channel Sun TV are being increased by 19% with effect from 15 July, 2013. Further rate hikes in other channels could happen before the start of the festive season. Management expects double digit ad growth for FY14.
Subscription revenues to grow: On a sequential basis analog subscription revenues grew by 2.7% and 22.6% YoY. On the back of strong DTH offtake due to Phase-II digitization, DTH subscriber numbers increased by 4.3% QoQ to 8.63mn and hence the company posted 6% sequential growth in revenues. International subscription revenues were flat on a sequential basis.
Margins to remain stable: Margins during the quarter contracted by 311bps on the back of higher cost of revenues (up 64.7% YoY) on the back of increase in owned programming. However EBIT margins were up by 39bps on the back of lower movie cost amortization. Going forward, we expect operating margins to remain stable at ~73-74%.
Other highlights: In FY13, radio business posted revenues of Rs1053mn with operating profits of ~Rs322mn. Management indicated it will further bid in Phase-III auctions particularly in four southern states of India. Management expects losses in IPL to remain under Rs300mn during FY14E while it plans to release three movies in FY14 with a cumulative budget of Rs350-400mn.
Estimates increased, Maintain BUY: We increase our earnings estimates marginally by 1.4%/1.1% for FY14/FY15. Operating margins have been reduced marginally on the back of higher programming cost. The stock is currently trading at 20.6x and 17.3x FY14E and FY15E respectively. We value the stock at 20x FY15E with a target price of Rs487 and maintain BUY rating on the stock.
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