Sun TV Network shares advanced on Monday after its March quarter results were in line with analysts' estimates despite a fall in margins due to high IPL-related costs.
Brokerage Nomura kept the rating on the stock unchanged at 'Neutral' and the target price at Rs 507 against Friday’s close of 425.90 per share, implying a potential upside of 19 percent.
Nomura in a report stated that Sun TV Network reported a 2 percent year-on-year decline in its revenue to Rs 840.4 crore in the March quarter of FY23 against Rs 857 crore a year ago which was in line with its expectations.
However, advertisement revenue remained flat against its estimate of a five percent year-on-year growth and subscription revenue growth of two percent also missed the estimate of three percent year-on-year expansion.
Sun TV Network’s earnings before interest tax depreciation and amortisation (EBITDA) declined 11.7 percent to Rs 497.8 crore in the fourth quarter of FY23 against Rs 563.9 crore a year ago.
“The EBIT margin at 50.7 percent (-16% y-y), was below our estimate of 53.8 percent. This was partly impacted by the booking of IPL (Indian Premier League) related costs,” Nomura stated.
Sun TV reported a 7.3 percent decline in net profit to Rs 380.2 crore for the March quarter compared to Rs 410 crore a year ago.
“Higher other income (Rs 80.8 crore, Nomura: Rs 34.7 crore) led to profit after tax of Rs 3.7 bn, down 10 percent y-o-y, largely in line with our estimate,” Nomura said.
SUN TV declared a final dividend of Rs 15 per share, maintaining the dividend payout at 35 percent.
The results for the quarter and year ended March 31, 2023 include income from the company’s cricket franchises (SunRisers Hyderabad and SunRisers Eastern Cape) for season 2023 of Rs 36.96 crores and Rs 287.27 crores respectively and corresponding costs of Rs 52.94 crore and Rs 204.98 crore.
“We continue to see structural growth risks for Sun’s ad business on the rising preference for OTT content, Sun’s delay in capitalizing on this opportunity, and existing OTT players such as Netflix (NFLX US, Not rated) competing for ad revenue in the future,” Nomura said.
Sun TV shares are trading 1.3 percent higher at Rs 431.45 on BSE at 9.57 AM.
