MOSL: SUN TV (Buy)-Robust quarter- margins to reel under pressure; Investments, though, to keep margins under pressure
sun tv: Robust quarter; margins to reel under pressure; Investments, though, to keep margins under pressure
(SUNTV IN, Mkt Cap USD2.9b, CMP INR521, TP INR720, 38% Upside, Buy)
- Stellar performance: SUNTV reported strong revenue growth of 32% YoY to INR9b (14% beat), mainly due to better-than-expected movie revenue and backed by healthy ad and subscription revenue. EBITDA, thus, grew by a robust 36% YoY to INR6.8b (15% beat), with the margin expanding 175bp YoY to 73.8%. PAT grew 32% YoY to INR3.5b (7% beat) on the back of strong EBITDA growth, partly offset by higher depreciation cost. For 9MFY19, revenue/EBITDA/PAT grew 29%/36%/38% YoY.
- Concall highlights: (1) Expect double-digit ad growth and 20% subscription revenue growth in FY20. (2) Garnering ~INR500m revenue from ~1m subscribers on Sun Nxt. (3) Digitization in Tamil Nadu to get completed by Jun-19. (4) Setting up a new team and building scale for ramping up Sun Nxt.
- Margins to reel under pressure: We expect ad/domestic subscription revenue CAGR of 12%/18% over FY19-21. However, (i) new launches on Sun TV and Sun Life channels, (ii) higher content- and marketing-led investments in Bangla channel and (iii) significant investments for ramping up original content on Sun Nxt platform would exert pressure on margins. Consequently, over FY19-21, we expect margins to contract 200bp to 69.2% and EBITDA CAGR of 12%.
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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