>SUN TV: Q4FY12 results

WHAT’S CHANGED…
Price Target ........................................................................... Changed from | 348 to | 300
EPS (FY12E)......................................................................... Changed from | 20.5 to | 18.8
EPS (FY13E)..........................................................................................Introduced at | 22.1
RATING...............................................................................................................Unchanged


Slowing economy darkens Sun…
Sun TV reported its Q4FY12 results, which were in line with our estimates. The topline stood at | 427.0 crore representing de-growth of 7.3% YoY as the topline for Q4FY11 was inflated by a one-time revenue from the movie Endhiran. Ad revenues de grew by 9.5% to | 234.0 crore
owing to the slowdown in the economy and fall in the TRPs of the channels. EBITDA for the quarter stood at | 328.2 crore against our estimate of | 330.7 crore. The EBITDA margin stood at 76.9% contracting by 216 bps YoY due to higher other expenses. The PAT stood at | 159.0
crore against our expectation of | 165.1 crore. In light of a continuous decline in TRPs, which will pressurise ad revenues, going forward, we have cut our revenue/PAT estimates for FY13 by 0.4%/8.4%, respectively. We continue to rate the stock as BUY with a target price of | 300.


Declining TRPs
The quarter was marked by a decline in the TRPs of the channels once again owing to competition from Arasu Cable, which has not carried Sun TV channels as yet and a power crisis in South Indian states. The management has indicated that talks with Arasu Cable have reached a final stage and a deal could be struck anytime soon. This is expected to address the decline in TRPs.


Ad revenue de-grows again
Ad revenues continued to de-grow for the second straight quarter due to a decline in TRPs and a challenging macroeconomic environment. Though a decline in TRPs is expected to be arrested soon, the macroeconomic environment is expected to remain challenging. We have
factored in a 13.3% and 14.8% growth of ad revenue for FY13 and FY14, respectively, in our calculations.


Valuations
We have valued the stock at 16x FY13E EPS and arrived at a target price of | 300, implying an upside of 20% from the CMP. The political pressure may have an overhang on the stock. We continue to rate Sun TV as BUY.

RISH TRADER