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MOSL: SUN TV NETWORK (Buy)- A gradual recovery in progress; intensifies content investment

SUN TV NETWORK: A gradual recovery in progress; intensifies content investment

(SUNTV IN, Mkt Cap USD2.8b, CMP INR525, TP INR620, 18% Upside, Buy)

 

• EBITDA grew 19% YoY (11% miss) as content costs grew faster than revenue growth at 34%, 25% below pre-COVID levels (1QFY20). PAT grew 38% (4% miss), aided by the change to a liberal amortization policy.
• The slower than expected recovery led to a marginal (4%) cut in EBITDA, but the shift towards a liberal amortization policy has pushed up our PAT estimate by 10-12%, leading to 12% PAT CAGR over FY21-23E.
• Intensifying content investment to win market share is a key positive, but delayed investment in OTT remains a concern. We maintain our Buy rating.

 

Revenue/PAT up 34%/38% YoY (below our estimate); announces a dividend of INR3.75

• Revenue rose 34% YoY to INR8.1b (6% miss) in 1QY22, on a low base of last year that saw a stringent COVID-led lockdown and absence of IPL. Advertising/subscription revenue increased by 95%/-6% YoY. Revenue was, however, lower by 25% v/s pre-COVID levels (1QFY20).
• EBITDA stood at INR4.9b, up 18.8% YoY (11% miss), aided by a strong growth in revenue, but partly offset by increased opex (66% YoY, including INR247.8m of IPL franchisee fees). EBITDA margin stood at 61.1% (down 760bp YoY).