Add Sun TV Network, target price Rs 452: ICICI Securities

urities has given an add rating to Sun TV Network with a target price of Rs 452. The share price moved up by 1.50 per cent from its previous close of Rs 397.40. The stock’s last traded price is Rs 403.35.

The brokerage says that though the company’s revenues would be impacted due to Covid-19 crisis in FY21, the management sees a cushion to net profit from lower cost of revenues and much lower amortisation, which should enable it to maintain flattish net profit. In programming, priority will be for producing fictions while non-fiction shows will have to wait for a few months.) Sun TV still intends to spend its committed Rs 1.5 billion on original shows for SunNXT. It does not expect IPL in FY21; however, in case IPL is played, it should add Rs 2 billion in pre-tax profit with the downside risk of Rs 250 million from ticketing revenue. Also, Sun TV remains cautious about recovery in radio business in FY21.



Investment Rationale

Sun TV Network’s Q4FY20 ad revenues declined 14.4 per cent year on year due to underlying weakness in the economy while Covid-19 crisis will add to the burden in FY21. However, the company’s unique model of higher subscription revenues (54 per cent in Q4FY20) and GRP benefit from a strong movie library in the South market will help outperform peers on earnings, and mitigate downside risk. The brokerage expects only a slight dip in EPS and has raised its EPS estimate by 7.7 per cent for FY21E on lower amortisation. Accordingly, the brokerage has increased the target price to Rs 452 from Rs 420.

Sun TV-Yes SecuritiesJuly12020

Source: urities

Financials

For the quarter ended March 31, 2020, the company reported consolidated sales of Rs 758.13 crore, down -10.58 per cent from last quarter sales of Rs 847.81 crore and down -17.36 per cent from last year’s same quarter sales of Rs 917.34 crore. The company reported net profit after tax of Rs 249.43 crore in the latest quarter.

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