Sun TV Network Limited - Subscription uptick likely; reiterate BUY - 1QFY14 Results Review - ANTIQUE

Sun TV 1Q results were better than our estimates. Ad revenues grew by 15% YoY, 4% ahead of our estimates. Subscription revenues increased by 25% YoY led by strong growth in cable and DTH revenue. Consequently EBIT margins (excluding IPL losses) stood at 53% and were 200bps ahead of our estimates. Reported margins stood at 39% and included INR308mn losses from IPL. Unlike peer ZEE we believe the subscription story for Sun is likely to unfold over the next 4-6 quarters led by cable TV digitalization in Chennai and Phase II locations. Consequently see scope for margin expansion.

Valuations and Outlook

We forecast EPS CAGR of 20% over FY13-15e vs. flattish growth during last two years given our view that uptick in subscription revenues should help expand margins. Expect stock to re-rate. Reiterate BUY with target price of INR550 for an upside of 30%.

Source : Equity Bulls

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