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Dolat Capital Report
Sun TV Network Ltd.'s Q3 FY23 revenue/Ebit/adjusted profit after tax is ahead of estimates by 6/5/7%. Reported broadcast business revenue/Ebit/adjusted profit after tax are -12.1/-14.5/-4.9% YoY. Q3 FY22 included higher revenues from movie distribution of ‘Annaatthe' and thus not comparable YoY. Like-to-like profit after tax was -1.5% YoY.
Sun TV is trading at an attractive 10.4/10.1/9.6 times FY23-5E earnings per share. Sun's strong balance sheet with C&CE of ~Rs 50 billion (~29% of Mcap) and leadership in Tamil market drives comfort. That said, Sun's under-investment in core broadcast/digital business remains a key constraint from future proofing of business perspective.
Low dividend payout with mountain of cash raise fears of capital misallocation. These have been constraining factors for re-rating and likely to continue so despite attractive valuations.
Sun is a potential acquisition candidate in our view. Events surrounding acquisition and/or increased pay-out may drive significant re-rating.
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