Sun TV Network Ltd (STNL) Result Update: Q3 FY 11 C.M.P: Rs.432.00 Target Price: Rs.497.00 BUY Date: 17 Mar 2011 Stock Data: SYNOPSIS Sector: Media Sun TV is India’s No.1 content provider Face Value Rs. 5.00 and TV network and is excited in building 52 wk. High/Low (Rs.) 556.50/370.55 a robust channel distribution platform. Volume (2 wk. Avg.) 1295580 Sun TV Network plans to restructure its BSE Code 532733 distribution business and team with Market Cap (Rs.In mn) 170242.56 creation of two separate verticals, one focused on managing the south Indian operations and the International business Share Holding Pattern and other focused on expanding the Sun TV bouquet into north, west and eastern markets of India. Sun TV Network has started a wholly owned subsidiary, `Sun TV Network Europe’ in United Kingdom to broadcast and distribute its channels in UK and Europe. 1 Year Comparative Graph Sun TV Network has utilized an amount of Rs. 355.77 crore towards capitalization of subsidiaries from IPO funds. Sun TV, which recently hiked its advertisement rates in its flagship channel. Sun TV has announced an increase in advertisement rates for all other channels in Telugu, Kannada and Malayalam. SUN TV LTD BSE SENSEX Years Net sales EBITDA PAT EPS P/E FY 10 13950.10 11530.60 5637.80 14.40 30.01 FY 11E 20791.40 17474.35 8010.28 20.33 21.25 FY 12E 24533.85 20528.55 9357.19 23.74 18.19 1 Peer Group Comparison CMP Name of the (As on Mar 17, Market Cap. EPS P/E P/BV company 2011) (Rs. Mn.) (Rs.) (x) (x) Dividend (%) Sun TV Network 432.00 170242.56 18.50 23.86 8.45 150 Deccan Chronicle 68.25 1661.7 8.85 7.71 1.32 150 Zee Entertainment 119.85 11722.24 6.14 19.52 4.15 400 Jagran Prakashan 113.60 3421.3 6.65 17.08 5.59 175 Investment Highlights • Q3 FY11 Results Update Sun TV has reported net profit of Rs 2254.90 million for the quarter ended on December.30, 2010 as against 1519.40 million in the same quarter last year, an increase of 48.41%. It has reported net sales of Rs 5979.90 million for the quarter ended on September.30, 2010 as against Rs 3950.80 million in the same quarter last year, a rise of 51.36%. Total income grew by 50.47% to Rs 6070.60 million from Rs 4034.30 million in the same quarter last year. During the quarter, it reported earnings of Rs 5.72 a share. Quarterly Results - Standalone (Rs in mn) As at Dec - 09 Dec - 10 %Change Net Sales 3950.80 5979.90 51.36 Net Profit 1519.40 2254.90 48.41 Basic EPS 3.86 5.72 48.41 2 3 • Sun TV hikes ad rates for Malayalam, Kannada channels Sun TV Network has announced hike in its Malayalam channels, ranging from 6% to 33% and also in the Kannada channels ranging from 5% to 13%, both effective from Apr. 1, 2011.The company operates twenty satellite television channels across four languages of Tamil, Telugu, Kannada and Malayalam has already announced increased in the advertisement rates of its Tamil channels and Telugu channels. • Sun TV hikes ad rates for telugu channel Sun TV has announced that the company is increasing its advertisement rates with effect from April 01, 2011 in its flagship Telugu channel, Gemini TV ranging from 6% to 13% and in other Telugu channels like Gemini Movies, Gemini Music, Gemini News, Gemini Comedy and Kushi ranging from 9% to 43%. The slot fees (broadcast fees) received from the content producers will also be increased accordingly. • Sun TV hikes ad rates in flagship channel Sun TV Network has increased its advertisement rates with effect from April 1, 2011 for its flagship Tamil Channel SUN TV ranging from 8 % to 32%. Further, according to the company, the advertisement rates have also been increased across the board for other Tamil Channels - KTV, Sun Music, Sun News, Chutti and Adhitya. The slot fees (broadcast fees) received from the content producers will also be increased accordingly. • Sun TV denies association with any other channel Sun TV in clarification to the unusual movement in the stock prices said that it owns and continues to operate only the following twenty channels in the four southern languages: Tamil (Sun TV, KTV, Sun News, Sun Music, Chutti TV, Adithya), Telegu (Gemini TV, Gemini Movies, Gemini News, Gemini Music, Gemini Comedy, Kushi), Kannada (Udaya TV, Udaya Varthagalu, U2, Chintu, Udaya Comedy), Malayam (Surya, Kiran). It further said that it is not bought over or associated in any manner whatsoever with any other regional south based channel (s) or network (s) and all statements linking them to any such channel (s) or network (s) is baseless, false and without any truth. • Utilises Rs 356 crore towards capitalization of subsidiaries 4 Against the total projected utilization of Rs 572 crore, which is net of issue expenses, from the initial public offering (IPO) funds, Sun TV Network has utilized an amount of Rs. 355.77 crore towards capitalization of subsidiaries. Similarly, Rs 102.23 crore has been used towards launch of new channels and purchase of new equipment and upgradation of existing equipment, while Rs 62.34 crore has been employed towards construction of owned corporate office. The balance proceeds from the IPO after meeting the IPO expenses, pending utilization have been invested in fixed deposits with banks. • Launches FM radio station in Gangtok Sun TV Network has launched FM radio station in Gangtok (Sikkim) under the `Red FM` brand through its subsidiary, South Asia FM. FM station can be tuned at 93.5 MHz frequency in Gangtok. The programs will cater to audiences of all age groups. With this launch, the total operational FM stations under Red FM brand are 44. • Sun TV Network`s 2 channels to be pay channels Surya TV and Kiran TV leading Malayalam satellite channels from the Sun TV Network will become pay channels with effect from Apr.1, 2010. The Non - CAS Cable rates for the said channels as a bouquet would be Rs 20.33 per subscriber, per month. The said channels will be pay channels in all CAS areas and would be charged at the rate of Rs 5.35 per channel, per subscriber, per month. • Sun TV Network floats subsidiary in UK Sun TV Network has started a wholly owned subsidiary, `Sun TV Network Europe in United Kingdom to broadcast and distribute its channels in UK and Europe`. Sun TV is a television broadcasting company based in South India and Kalanithi Maran is the chairman and managing director of the company. • Plans to restructure distribution biz Sun TV Network plans to restructure its distribution business and team with creation of two separate verticals, one focused on managing the south Indian operations and the International business and other focused on expanding the Sun TV bouquet into north, west and eastern markets of India. The key focus of these new verticals is to distribute the Sun Television channels in India and internationally via all fixed networks including cable, DTH, IPTV, HITS and MMDS. 5 Sun TV is India’s No. 1 content provider and TV network and is excited in building a robust channel distribution platform. Company Profile Sun TV started its journey in April 1993 with four and a half hours a day time sharing with ATN Network. Sun Network, India's largest media conglomerate has power packed Twenty two TV Channels with the reach of more than 95 million households in India. Today, it is second largest television network in India, with 22 channels and 43 FM radios in several Indian languages. It is world's no.1 Tamil channel that features movies, news, serials and shows -- 24 hours a day. It has control over 50,000 hours of original content, which is an essential driver for any media company. It also has a presence in South Africa, Australia, Europe, USA, Canada and Asia. It also has Sun Direct one of the largest DTH (Direct To Home Satellite TV service) service provider in India having more than 4 million subscribers and Sun Pictures the film division of Sun Network which produces / releases atleast 8 movies every year. Business activities TV channels- It has 22 channels in four languages Tamil, Telugu, Malayalam and Kannada. namely Sun TV, KTV, Sun Music, Sun News, Chutti TV, Surya TV, Kiran TV, Gemini TV, Teja TV, AdithyaTV, Teja News, Gemini News, Gemini Music, Gemini Cable Vision, Udaya TV, she TV, Udaya2, Udaya Movies, Udaya Varthegalu, Udaya News, Kushi TV & Chintu TV. FM Radio- It has also forayed into the radio broadcasting segment and has 43 FM radio channels. Sun TV Network became first to open Tamil’s first private FM station -- Suryan FM. Print Media- It has six publications under this segment namely Dinakaran, Tamizh Murasu, Kungumum, Mutharam, Vannathirai and Kumguma Chimizh. 6 Financial Results 12 months ended Profit & Loss A/C (Standalone) Value(Rs. in million) FY09 FY10 FY11E FY12E Description 12m 12m 12m 12m Net Sales 10082.00 13950.10 20791.40 24533.85 Other Income 833.20 425.10 391.24 410.80 Total Income 10915.20 14375.20 21182.63 24944.65 Expenditure -2366.10 -2844.60 -3708.28 -4416.09 Operating Profit 8549.10 11530.60 17474.35 20528.55 Interest -38.90 -12.00 -7.03 -7.38 Gross Profit 8510.20 11518.60 17467.32 20521.18 Depreciation -1849.20 -2854.40 -5466.28 -6450.22 Profit before Tax 6661.00 8664.20 12001.04 14070.96 Tax -2289.90 -2990.40 -3990.76 -4713.77 Profit after Tax 4371.10 5673.80 8010.28 9357.19 Equity Capital 1970.40 1970.40 1970.40 1970.40 Reserves 15954.70 18179.70 26189.98 35547.17 Face Value (Rs) 5.00 5.00 5.00 5.00 Total No.