MOSL: SUN TV (Buy)-Ad growth revives-digitization-led subscription revenue to witness robust growth
SUN TV: Ad growth revives; digitization-led subscription revenue to witness robust growth
(SUNTV IN, Mkt Cap USD6.0b, CMP INR973, TP INR1225, 26% Upside, Buy)
- EBITDA up 12% YoY: Standalone revenue grew 16% YoY to INR6.8b (in-line), led by 22% ad revenue growth and 16% domestic subscription growth. EBITDA grew 12% YoY to INR4.9b (4% miss), with 260bp YoY margin contraction to 72%. Production cost was high during the quarter due to shift from private to commission model, and high-value fiction content. PAT grew 11% YoY to INR4.1b (10% miss), below EBITDA growth, largely on lower other income. Board declared an interim dividend of INR2.5/share.
- Subscription, ad growth to fire: SUNTV remains a sweet spot, with both subscription and ad revenue firing on all cylinders. Management indicated that potentially 10-12m Tamil Nadu analog subscribers are likely to move to digital cable by FY19, offering INR3.5b incremental revenues. Of these, already 3m set top boxes are seeded by Arasu and other MSOs. Further improvement in rating across Tamil Nadu, Malayalam and Kannada channels is allowing healthy ad growth. We expect revenue/PAT CAGR of 16%/24% over FY18-20.
- Concall highlights: 1) Incremental INR3.5b revenue to come from 10-12m digitized subscribers in TN. Of these, 3m are seeded, so revenues should be recognized in coming quarter, and the rest by Sept’18 as per ARASU’s notification to MIB. 2) Healthy ratings across Tamil Nadu, Malayalam and Kannada genre should lead to double-digit ad revenue growth in FY19. 3) Presently, two slots each in prime time and non-prime time are on commission model. Overtime, it will be a 50:50 mix of both commission and PP model.
Sun TV Network Limited. Sun TV Network Limited is engaged in providing broadcasting services. The Company operates through Media and Entertainment segment. Its geographical segments include India and Others. It is engaged in producing and broadcasting satellite television and radio software programming in the regional languages of South India. It operates television channels in approximately four South Indian languages to viewers in India, and also to viewers in Sri Lanka, Singapore, Malaysia, the United Kingdom, Europe, the Middle East, the United States, Australia, South Africa and Canada. It operates Sun TV channel. Its other satellite channels are Surya TV, Gemini TV and Udaya TV. It is also into the business of frequency modulation (FM) radio broadcasting at Chennai, Coimbatore and Tirunelveli. It also has the license to operate an Indian Premier League franchise Sun Risers Hyderabad. It has presence across various genres, such as general entertainment, movies, music, news, kids, action and life.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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