Citi raises Sun TV Network target price to Rs 485

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Published: August 23, 2016 6:10:11 AM

Sun reported 10%, 7%, 21% and 19% y-o-y growth in revenues, EBITDA, EBIT and PAT respectively – headline nos were ahead; the variance was due to — better IPL realisations and cable revenues, while advertising declined again (-3%). Ex IPL, core revenues/EBIT rose 4%/10%.

Sun reported 10%, 7%, 21% and 19% y-o-y growth in revenues, EBITDA, EBIT and PAT respectively – headline nos were ahead; the variance was due to — better IPL realisations and cable revenues, while advertising declined again (-3%). Ex IPL, core revenues/EBIT rose 4%/10%.

The decline in advertising was in-line with our ests, unlike a section of the street that was expecting better nos. This was given the sharp degrowth in non-Tamil Nadu GECs (we est. 20-25% ad decline), even though the flagship channel grew 16%. Overall, we build 10% ad growth for FY17E, predicated on an uptick in the 2H given the benign base and assuming improvement in viewership ratings. BARC data in recent weeks suggest better trends for Sun in AP (mgmt. notes last week ratings are the highest in four-five years), which may help in the upcoming negotiations; Karnataka ratings remain weak.

There is little progress on digitalisation in the key TN and AP markets. International subscription trends (which include digital revenues) remained subdued (+3% y-o-y). We raise EPS estimates (+5%), mainly driven by cable + IPL and TP to `485 (from `395) on 15x FY18E EPS; the multiple increased from 13x looking at the changing trends in AP, but remains materially lower than Zee given the legal uncertainties and softer business trends. 4% dividend yield is a support.

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