>SUN TV NETWORK (ICICI SECURITIES)

Standing tall

Sun TV Network’s Q4FY09 results were strong with revenues and PAT growing 12% YoY and 25% YoY to Rs2.75bn and Rs1.14bn respectively. EBITDA margin jumped 1760bps YoY to 81.8%, but EBIT margin was tempered on higher amortisation of acquired Movie rights. The radio business reported Rs332mn revenues and Rs688mn loss (Sun TV’s share) in FY09, which was higher than the guidance. FY09 consolidated revenues were at Rs10.4bn and PAT at Rs3.68bn. Sun TV witnessed the strongest growth among media companies in a relatively
tough quarter as regards advertising. This highlights the strength of its market position and regional ad market. We marginally lower FY10E & FY11E EPS estimates to Rs11.1 and Rs13.1 respectively. We raise our target price to Rs262 from Rs184 based on FY11E P/E of 20x. We upgrade Sun TV to BUY from Hold; recommend buying on dips.

■ Q4FY09 revenues grew a strong 11.9% YoY in a tough quarter, when most media companies witnessed a decline in advertising revenues. Sun TV’s strong revenue growth was driven by regional advertising, which was also the case for Zee News and Jagran Prakashan.

■ DTH revenues propelled growth, contributing Rs840mn revenues or 40% to the overall Pay TV revenues. Sun TV reported Rs2.1bn and guided for Rs3-3.2bn Pay TV revenues in FY10 driven by DTH revenues.

■ Radio losses high at Rs688mn in FY09 versus Rs403mn loss in FY08, driven by expansion. Radio revenues increased to Rs332mn in FY09 from Rs89mn. Cash infusion by the foreign partner, Astro Malaysia in the radio business to increase its stake from 7% to 20% will help Sun TV meet operating losses.

■ Upgrade to BUY. Sun TV has been able to sustain its growth trajectory in a relatively difficult year for media companies, which indicates the robustness of its business model. We raise our target price to Rs262 from Rs184 based on FY11E P/E of 20x. We upgrade Sun TV to BUY from Hold; recommend buying on dips.

To see full report: SUN TV