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Research
Sun TV Network - 4QFY12 Results Update - Motilal Oswal
Posted On : 2012-06-04 10:53:50( TIMEZONE : IST )
Sun TV's 4QFY12 PAT declined 24% YoY and 5% QoQ to INR1.59b, in line with our estimate of INR1.62b.
- Revenue/EBITDA declined 7/10% YoY but were 1-2% above estimates. EBITDA margin stood at 76.9%, impacted by ~INR100m provision taken for bad debts.
- Advertising and broadcast revenue declined 5% YoY (vs 13% YoY ad revenue decline for Zee) to INR2.8b. Management mentioned that ad growth outlook remains sluggish as there has been no improvement in the operating environment. We factor-in advertising and broadcast revenue growth of 10% in FY13 and 13% in FY14 vs a 1% decline in FY12.
- While international revenue grew by 29% YoY to INR220m, domestic cable revenue declined 45% YoY (up 7% QoQ) to INR310m as Sun is not getting analog revenue from Tamil Nadu and has been unable to reach any subscription agreement with the Tamil Nadu state-owned Arasu cable. Management remains hopeful of concluding a deal with Arasu soon which should lead to an improvement in cable revenue as well as operating environment in Tamil Nadu for Sun.
- Overall subscription revenue declined 10% YoY but grew 1% QoQ to INR1.39b. During FY12 subscription revenue increased 2% YoY as decline in analog cable revenue was offset by increase in DTH/international.
- Sun TV has announced interim dividend of INR0.75 per share taking the total dividend to INR9.5 in FY12.
- Loans and advances increased 220% YoY to INR5.3b while trade receivables were up by ~20% YoY to INR46.5b (receivable days up from 74 to 97).
- Increase in loans and advances was on account of advances paid for movies rights (~INR2b) and capex. We believe that deterioration in working capital might also be a reflection of the regime change in Tamil Nadu.
- We are downgrading our earnings estimates by 9-10% to reflect lower ad/DTH growth and target multiple from 16x to 14x given deterioration in working capital and increasing competitive intensity in the Sun's markets.
- We expect EPS CAGR of 14% during FY12-14E. The stock trades at 12.8x FY13E EPS of INR19.6 and 11x FY14E EPS of INR22.8. Maintain Buy with a revised target price of INR320 based on 14x FY14 EPS.
