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Dolat Capital Report
Sun TV Network Ltd.'s Q4 FY24 results showed weak performance in its core business, with muted revenues and rising costs. However, IPL revenue and other income aided profit after tax, both in Q4 and FY24. In Q4 FY24, core business revenue/ Ebit/APAT were +1.8/-15.2/-2.7%YoY and FY24 at 3.4/-3.5/+0.7% YoY.
Sun's strong balance sheet with C&CE of ~Rs 70 billion (~27% of Mcap) and leadership in Tamil market provides a sense of comfort. But low-growth in core business and under-investment in digital (though has paid-off till now) are constraints from future proofing the business and/or growth perspective.
Additionally, a low dividend payout raises fears of capital misallocation. These are constraining factors for re-rating. That said, potential industry tailwinds viz. supportive base, growth revival and sector consolidation are potential positives.
Sun is trading at 13.6/13.7/13.9x FY24/25/26E EPS. We expect earnings to decline on account of increasing costs and higher amortization costs led by changes in accounting policies and likely slowdown in incremental revenues from IPL.
We alter our FY25/26E EPS by 1.7/-4%. Downgrade to ‘Reduce' rating from Buy with target price of Rs 720 at15 times FY26E EPS (versus Rs 750 at 15 times FY26E).
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