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Emkay Global
Sun TV (Hold)
Target: ₹439
CMP: ₹425.85
Sun TV Networks has reported a weak set of numbers, with a higher-than-estimated decline in advertising revenue. However, domestic subscription revenue surprised positively by rising 12 per cent y-o-y, boosted by digital subscriptions. Higher opex led to a 10 per cent EBITDA miss.
Market share of its flagship channel (Tamil GEC) has improved over the last few months.
We believe that sustained content investments will be crucial to maintain the share and drive ad revenues. Additionally, IPL during Sep-Nov will support revenues and profitability.
A recovery in advertising was seen in July and August but local advertisers are yet to come back.
Visibility in digital subscription revenue gave confidence to increase content spends on SunNXT, which would be higher than targeted spends of ₹150 crore over 15 months.
Although we appreciate the increased spends for original OTT content, we believe that execution on the same would be key. We retain a Hold rating with a revised target price of ₹439.
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