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Dolat Capital Report
Sun TV Network Ltd.’s Q2 FY24 is not comparable YoY on account of contribution from ‘Jailer’ movie. Revenue/Ebit/profit after tax grew by 10.4/26.2/18.5% YoY.
Sun TV is trading at an attractive 13.6/13.6/13.1 times FY24/25/26E earnings per share. Sun’s strong balance sheet with cash and cash equivalent of ~Rs 61bn (~24% of mid cap/current market price) and leadership in Tamil market drives comfort. But, Sun’s low-growth, under-investment in core broadcast/digital business are constraints from future proofing of business. Low dividend payout raise fears of capital misallocation. These have been constraining factors for re-rating and likely to continue so. That said, Sun is a low-growth but a safe heaven bet with strong balance sheet.
Broadly maintain estimates. Downgrade to 'Accumulate' due to sharp runup in trailing three months with target price of Rs 740 at 15 times FY26E EPS (versus Rs 585 at 12 times FY25E). Increase in multiple is to factor improvising medium-term ad and subscription outlook as new tariff order behind, potential consolidation in media (Zee Sony, Star-Reliance) and weakening of digital investments/players.
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