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India Equity Research Reports, IPO and Stock News
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Sun TV Network (SUNTV)
Media
As good as it gets, in a challenging environment. Sun TV reported 1QFY12 EBIT of
Rs2.6 bn (+6% yoy), marginally below expectations, led by (1) unusually weak FMCG ad
spends and (2) higher-than-expected film telecast rights cost; Sun TV has deferred the
Tamil telecast of Endhiraan (possibly 3QFY12E) given the scale of the movie. Reiterate
ADD with TP of Rs440 (Rs480 previously); Sun TV stock continues to trade on nonfundamental news-flow (related to Sun Pictures recently) but remains a good high-beta
high-return trade led by (1) leadership position in South India (beyond politically
sensitive Tamil market), (2) robust free cash flows (completion of large capex plan in
FY2011) and (3) attractive valuations (12X FY2013E EPS, >3% dividend yield).
1QFY12 results analysis: Marginally weak on advertising, deferred Endhiraan telecast
` Sun TV reported 1QFY12 EBIT of Rs2.6 bn (+6% yoy), below our Rs2.85 bn expectation.
However, it is as good as it gets in this challenging environment with unusually weak FMCG
advertising spends (~40% share of C&S TV; 16% yoy decline in HUL advertising spends in
1QFY12 is the weakest performance in the last 5 years).
` Additionally, Sun TV reported higher-than-expected C&S telecast rights costs; Sun Pictures
blockbuster movie Endhiraan had its Telugu telecast in 4QFY11 but the Tamil telecast was
deferred (possibly 3QFY12E) since Sun TV wants to leave some firepower for the festival season,
notably given the uncertainty surrounding Sun Pictures.
Reiterate ADD: Non-fundamental news-flow persists but also robust fundamental drivers
Reiterate ADD with revised FY2013E DCF-based TP of Rs440 (Rs480 previously); the change in our
TP results from (1) reduced FY2012E advertising growth (12% versus 15%), (2) modest reduction
in Sun TV paid DTH subscriber base and (3) reduced Sun Pictures revenues and EBIT contribution.
The stock continues to trade on non-fundamental news-flow, most recently pertaining to the
arrest of Sun Pictures CEO, Mr. Hansraj Saxena; Sun Pictures’ FY2013E contribution to Sun TV
revenues and EBIT is ~3% and ~1%, respectively. Thus far, there has not been any on-ground
activity in Arasu Cable, which could prove to be a material event risk for the company (thus our
ADD rating despite ~42% upside to CMP; we continue to assume 13.5% risk weight for our DCF
valuation to counter the negative event risk scenario). We await the start of Arasu Cable and its
impact on Sun TV operations/financials before revisiting our rating.
Nonetheless, Sun TV stock remains a good high-beta, high-return trade led by (1) leadership
position in South India (beyond the politically sensitive Tamil market), (2) robust free cash-flow
generation going ahead (completion of large capex plan in FY2011), (3) strong balance sheet
resulting in potential expansion in core (niche channels) and new markets (regional/niche) as well
as (4) attractive valuations (12X FY2013 EPS, at 25% discount to Zee TV on account of potential
unfavorable political/event risks) with >3% FY2011 dividend yield.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Sun TV Network (SUNTV)
Media
As good as it gets, in a challenging environment. Sun TV reported 1QFY12 EBIT of
Rs2.6 bn (+6% yoy), marginally below expectations, led by (1) unusually weak FMCG ad
spends and (2) higher-than-expected film telecast rights cost; Sun TV has deferred the
Tamil telecast of Endhiraan (possibly 3QFY12E) given the scale of the movie. Reiterate
ADD with TP of Rs440 (Rs480 previously); Sun TV stock continues to trade on nonfundamental news-flow (related to Sun Pictures recently) but remains a good high-beta
high-return trade led by (1) leadership position in South India (beyond politically
sensitive Tamil market), (2) robust free cash flows (completion of large capex plan in
FY2011) and (3) attractive valuations (12X FY2013E EPS, >3% dividend yield).
1QFY12 results analysis: Marginally weak on advertising, deferred Endhiraan telecast
` Sun TV reported 1QFY12 EBIT of Rs2.6 bn (+6% yoy), below our Rs2.85 bn expectation.
However, it is as good as it gets in this challenging environment with unusually weak FMCG
advertising spends (~40% share of C&S TV; 16% yoy decline in HUL advertising spends in
1QFY12 is the weakest performance in the last 5 years).
` Additionally, Sun TV reported higher-than-expected C&S telecast rights costs; Sun Pictures
blockbuster movie Endhiraan had its Telugu telecast in 4QFY11 but the Tamil telecast was
deferred (possibly 3QFY12E) since Sun TV wants to leave some firepower for the festival season,
notably given the uncertainty surrounding Sun Pictures.
Reiterate ADD: Non-fundamental news-flow persists but also robust fundamental drivers
Reiterate ADD with revised FY2013E DCF-based TP of Rs440 (Rs480 previously); the change in our
TP results from (1) reduced FY2012E advertising growth (12% versus 15%), (2) modest reduction
in Sun TV paid DTH subscriber base and (3) reduced Sun Pictures revenues and EBIT contribution.
The stock continues to trade on non-fundamental news-flow, most recently pertaining to the
arrest of Sun Pictures CEO, Mr. Hansraj Saxena; Sun Pictures’ FY2013E contribution to Sun TV
revenues and EBIT is ~3% and ~1%, respectively. Thus far, there has not been any on-ground
activity in Arasu Cable, which could prove to be a material event risk for the company (thus our
ADD rating despite ~42% upside to CMP; we continue to assume 13.5% risk weight for our DCF
valuation to counter the negative event risk scenario). We await the start of Arasu Cable and its
impact on Sun TV operations/financials before revisiting our rating.
Nonetheless, Sun TV stock remains a good high-beta, high-return trade led by (1) leadership
position in South India (beyond the politically sensitive Tamil market), (2) robust free cash-flow
generation going ahead (completion of large capex plan in FY2011), (3) strong balance sheet
resulting in potential expansion in core (niche channels) and new markets (regional/niche) as well
as (4) attractive valuations (12X FY2013 EPS, at 25% discount to Zee TV on account of potential
unfavorable political/event risks) with >3% FY2011 dividend yield.
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