Buy Sun TV Network, target price Rs 588: Nomura

Nomura has retained buy rating on Sun TV Network and cut target price to Rs 588 from Rs 731. The stock ended up 0.7 per cent at Rs 376.85 on Friday while the BSE Sensex closed 535.86 points down (-1.68 per cent) at 31,327.22.

Sun TV Network Ltd., incorporated in 1985, has a market cap of Rs 14851.08 crore.

Investment Rationale


With Nomura economists expecting India GDP to contract 0.4 per cent year on year in FY21, advertising spends are likely to be impacted significantly, said Nomura. The brokerage expects s advertising revenue to decline around 12 per cent YoY in the Q4 and 22 per cent in FY21. On a low base, FY22 growth is likely to bounce back by around 19 per cent YoY, said Nomura.

Financials

Sun TV Network's key products/revenue segments include Income From Advertisement which contributed Rs 1395.12 crore to sales value (48.73 per cent of total sales); Subscription Income which contributed Rs 1308.57 crore to sales value (45.71 per cent of total sales); Other Services which contributed Rs 145.20 crore to sales value (5.07 per cent of total sales); Income from Content Trading which contributed Rs 13.53 crore to sales value (0.47 per cent of total sales); Income from Films Production & Distribution which contributed Rs .03 crore to sales value (0.00 per cent of total sales) for the year ending March 31, 2018.

For the quarter ended December 31, 2019, the company reported consolidated sales of Rs 847.81 crore, up 2.70 per cent from last quarter sales of Rs 825.52 crore and down -9.74 per cent from last year same quarter sales of Rs 939.32 crore. The company reported net profit after tax of Rs 383.73 crore in the latest quarter.

Promoter/FII Holdings

Promoters held 75 per cent stake in the company as of third quarter ending December 31, 2019, while FIIs held 8.96 per cent, DIIs 6.89 per cent and public & others 8.83 per cent.