IPL has been a success for Sun TV but in later years, partly driven by external factors. However, other initiatives (Marathi, Bengali, Hindi channel launch as well as Africa franchise) are yet to deliver.
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Dolat Capital Report
Sun TV Network Ltd.'s Q3 FY25 results were weak. Standalone revenue/Ebit/adjusted profit after tax came in at -10.4/-30.2/-20.7%. Revenue de-growth was led by weak ad revenues and rising costs.
The company's strong BS with C&CE of ~Rs 85 billion (~33% of Mcap), IPL franchises and leadership in Tamil market provides comfort. But persistent de-growth in core business is -ve. Core Ebit in FY23/FY24/ 9M FY25 declined by ~6%/flat/~27%.
We expect earnings per share to see a modest CAGR of ~3% over FY25-27, which is still lower than FY24. Notably, EPS was flattish at ~Rs 40 over FY19-23, prior to the boosts driven by IPL in FY24.
Sun TV is trading at 14.3/14/13.5x FY25-27E. We reduce our FY25/26/27E EPS by 5/6/6%. Despite a ~30% decline in stock price from the peak, we see limited triggers for growth revival. We thus reduce our target multiple from 15x to 13x and downgrade to ‘Sell' rating from Reduce with a revised target price of Rs 600 @ 13x FY27E EPS (versus Rs 745 at 15x FY27E). Low-dividend payout is an additional concern.
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