Ad Disappoints, Subscription Accelerates: Sun TV Network
Ad Disappoints, Subscription Accelerates: Sun TV Network
Ad Disappoints, Subscription Accelerates: Sun TV Network
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Key highlights
♦ Sun Life to aid recoup market share loss as management targets to address youth audience with its commissioned
content (mix of fiction and premium non-fiction content, along with movies); current ratings are in sync with Colors
Tamil – expects current monthly ad revenue run-rate of Rs 10 mn to grow to Rs 40-50 mn in next 2-3 quarters.
♦ Sun NXT – strategic rejig: Unlike earlier, SUNTV now plans to scale up original content investments (target youth) as
it received healthy response from its experimental original content and ~8,000 movie library; plans to scale up
content gradually (no guidance on exp. Investments yet). Current subs are fair mix of domestic and international.
♦ Management is in talks with telecom players to enhance Sun NXT distribution. While current offering continues to be
subscription based (Rs 50 per month), management will evaluate ad potential as well.
♦ Q2 revenue grew 11% YoY to Rs 7.5bn, EBIT grew 20% to Rs 4.7 bn (on 24% dip in amortization; EBIT margin at
63% vs. 58.3% YoY; FY18 at 52.4%), while PAT grew 23% YoY to Rs 3.5 bn.
♦ Management reiterated amortization guidance of Rs 4-4.3bn (H1 at Rs ~2 bn) and expects to spend Rs 2.8-3 bn on
production of 3 movies in FY19 (2 with Rajnikanth and 1 with Vijay)
Exhibit 4: Subscription revenue growth trend – full benefits from Arasu yet to come in
18
9.7 10.0 15
5.6 11.0
16
5
14 (3.7)
(5)
12 17.0
12.7 14.0 15.3 18.7
10 (15)
FY17 FY18 FY19E FY20E FY21E
10
12%
8
9.6 11.4 13.7 16.8 19.9
6 8%
FY17 FY18 FY19E FY20E FY21E
Exhibit 7: Core content cost to grow at 38% CAGR; movie content at 7% CAGR
4.0 20%
3.5 0%
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DEFINITION OF RATINGS
Ratings Expected absolute returns over 12 months
BUY More than 10%
HOLD Between 10% and -10%
SELL Less than -10%
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Sun TV Network (SUTV.BO, SUNTV IN) Price Chart and Recommendation History