Sun TV Network Ltd

Initiating Coverage

 

Key Data

CMP Rs 296.60

Date April 21st 2008

Sector Media & Entertainment

Face Value Rs.5

BSE Code 532733

52 Week H/L Rs 1779/ 260

Market Cap Rs 11783 Cr

 

Investment Rationale

 

Sun TV follows a unique business model with regards to sourcing content as compared to its competitors. Most of the content is sourced in house and for its outsourced content, it brings down the cost by selling advertisement time slots to its content providers instead of buying the content outright. This helps the company follow a low cost content sourcing model and helps it maintain high operating margins. Sun TV sources close to 75% of its content requirement in house – 40-45% is movie based, 8-10% is news and the rest is game shows, talk shows and variety shows. Movie and movie related content generates high viewer ship in South India. The Sun Network has acquired around 80% of the movies which are released in southern India. It has a library of 8,000 movie titles and holds perpetual rights for close to 95% of its movies. Sun TV Network has presence across genres like general entertainment, movies, music, and news, except in Kerala, where it offers only general entertainment and movies. We believe that a bouquet of offerings spanning the above genres adds to viewer stickiness. The company has added a new channel, Chutti TV, positioned as the first Tamil kids channel. Chutti TV has been a big hit – its TRP ratings (4.75%) are higher than some of the Tamil GECs.

 

Key Developments

 

Launch of FM Stations

Sun TV Network has announced the launching of the FM radio station at Jamshedpur under the brand ‘S FM’ from 13 April 2008 through the subsidiary South Asia FM. Sun TV Network has announced the launching of its FM radio stations at Nasik and Vadodara under the brand ‘S FM’ from 17 April 2008 through its Subsidiary South Asia FM. These dtations can be heard at 93.5 MHz frequency in Nasik and Vadodara and will cater to the audience of all age groups. The company holds licenses for 44 FM radio stations across India, and will be one of the largest radio broadcasters in India when all the remaining 13 stations become operational.

 

Financial performance

 

Q-o-Q basis net sales have increases by 91% to Rs 217.78 crores in 3QFY08 as compared to Rs 114.02 crores in 3QFY07. EBDITA has increased to Rs 185.23 crores in 3QFY08 as compared to Rs 99.36 crores in 3QFY07, in percentage terms it has shown a growth of 86.42%. EBDITA margins has been better in 3QFY08 to 78.53% as compared to 2QFY08 71.91%. PAT has increased to Rs 102.30 crores in 3QFY08 as compared to Rs 59.77 crores in 3QFY07, in percentage terms it has shown a growth of 71.16%. PAT margins have been increased to 44.10% in 3QFY08 as compared to 38.40% in 2QFY08. NPM in FY 2007 was 34.22% as compared to 37.97% in FY 2006.

 

Valuation

 

Sun TV is currently trading at trailing P/E of 29.63x which is less as compared to its Peer group and it has Market cap/Sales of 11.76x which is better than ZEE entertainment and NDTV.

 

Click Here for In-depth Sun TV Network Ltd research report by KR Choksey, company profile along with stock recommendations, Sun TV Network Ltd target price and for making informed investment decisions.

Kisan Ratilal Choksey Shares and Securities Pvt. Ltd.
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