Sun TV shares plunge 11% on weak Q2 results

Our Bureau Chennai | Updated on November 13, 2019

Spending towards content is expected to remain high, say analysts

The stock of Sun TV Network plunged by Rs 58.70, or 11 per cent, to Rs 470.45 on the NSE after its disappointing Q2 result. Earlier, the stock crashed 14 per cent to a low of Rs 455.25.

More short positions? 

Open Interest jumped 44 per cent at 38.25 lakh shares in the F&O segment, signalling addition of short positions. The un-matched order book of Sun TV futures indicates overwhelming sellers.The 500-call and the 450-put were the most active options, signalling the possible range for Sun TV shares.

Sun TV Network Ltd on Tuesday reported a marginal increase of 1.04 per cent in consolidated profit after tax at ₹368.79 crore for the second quarter ended September 30 against ₹364.99 crore in the year ago period.

Its total income rose 6.79 per cent to ₹900.74 crore (₹843.44 crore). The company’s total expenses rose 65.95 per cent to ₹499.54 crore (₹301.01 crore) a year.

Analysts' view

According to Emkay Global, Sun TV Q2 performance disappoints on operating performance. It retains 'hold' recommendation on the stock with a target price of ₹497.

Sun TV posted weak operating results, impacted by muted advertisement revenues and operating cost inflation although management stated that there were one-offs to the tune of ₹28 crore, said the brokerage.

Subscription revenue was also marginally impacted by new tariff order implementation. After a few quarters of dismal performance, Sun TV (Tamil)'s viewership market share improved in Q2, supported by increased content launches and higher spends, it said.

Content cost inflation is expected to continue as the focus is on reviving market share, Emkay further added.

Subscription revenue growth is expected to rebound from Q4FY20 as new deals were signed with DTH operators in September. The recent deal for SunNxt with JIO and a likely one with another telco soon should give nearly ₹100 crore of incremental revenues in FY21, Emkay said.

ICICI Direct Research,  Sun TV has reported a weak set of numbers with a challenging economic environment, increased costs (including some one-offs) weighing on topline and EBITDA. The weak macroeconomic growth clouds the ad growth outlook in the near term, while content spend is expected to remain elevated both to maintain/regain market share in key markets as well for SunNXT.

ICICI Direct added: "The silver lining, on the other hand, is TN digitisation potential and much needed focus on (over the top) OTT segment. However, we would turn constructive when we witness ad recovery and stabilisation in costs. We maintain 'Hold' rating with a target price of Rs 500/share," it added.

'Buy' call from JM FInancial

However, JM FInancial, maintains its buy rating on Sun TV with a price target of Rs 600 (revised down from earlier target of Rs 680). "Nonetheless, we retain our Buy rating over a 12-month horizon, because: monthly viewership share of flagship Sun TV channel continues to inch up steadily, and is now back to  over 41 per cent after 12-months; we assume ad-spends to recover in FY21, and forecast a moderate 6 per cent y-o-y ad growth for STN; EBITDA and EPS are likely to grow 20 per cent in FY21, thanks to ad growth revival, operating leverage and full-season benefit of IPL; and attractive FY21 valuations," JM Financial has reasoned out.

Published on November 13, 2019

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