CMP 419.00

Target Price 473.00

ISIN: INE424H01027

JUNE 2nd

2014

SUN TV NETWORK LTD

Result Update (PARENT BASIS): Q4 FY14

BUY

Index Details

Stock Data

Sector Broadcasting & Cable TV

BSE Code 532733

Face Value 5.00

52wk. High / Low (Rs.) 457.25/324.15

Volume (2wk. Avg.) 91000

Market Cap (Rs. in mn.) 165119.52

Annual Estimated Results (A*: Actual / E*: Estimated)

YEARS FY14A FY15E FY16E

Net Sales 20967.80 22854.90 24683.29

EBITDA 15425.90 17226.59 18702.95

Net Profit 7169.60 8127.67 8966.71

EPS 18.19 20.62 22.75

P/E 23.03 20.32 18.41

Shareholding Pattern (%)

1 Year Comparative Graph

SUN TV NETWORK LTD S&P BSE SENSEX

SYNOPSIS

Sun TV Network Ltd is engaged in producing and

broadcasting satellite television and radio software

programming in South India.

In Q4 FY14, Net profit jumps to Rs.1975.70 mn an

increase of 11.31% against Rs. 1775.00 mn in the

corresponding quarter of previous year.

The company’s net sales registered 10.05% increase

and stood at Rs. 5201.80 mn from Rs. 4726.70 mn

over the corresponding quarter of previous year.

Operating profit is Rs 4132.00 mn during the quarter

as against Rs. 3702.00 mn in the corresponding

period of the previous year.

The Company has recommended a final dividend of

45% i.e. Rs. 2.25 per equity share of face value Rs.

5.00 each for the year ended 31 March, 2014.

The company’s FM Radio operations maintain

revenue growth of 20% year on year and reporting

18% PAT margins.

During the year ended 31st, March 2014, the

Revenues was up by 15% at Rs. 20967.80 million as

against Rs. 18176.20 million in previous year.

For the year ended 31st march 2014, EBITDA was up

by 6% at Rs. 14633.80 mn and Net Profit also up by

5% at Rs. 7169.60 mn in comparison to Rs. 6833.40

mn for the previous year

Net Sales and PAT of the company are expected to

grow at a CAGR of 11% and 9% over 2013 to 2016E

respectively.

PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

Sun Tv Network Ltd 419.00 165119.52 18.19 23.03 5.21 190.00

TV Today Network Ltd 149.00 8848.90 10.31 14.43 2.73 15.00

Entertainment Network India Ltd 406.80 19068.20 17.51 22.84 3.26 10.00

Zee Entertainment Enterprises Ltd 267.80 274495.10 7.55 35.52 8.17 200.00

Recommendation & Analysis - ‘BUY’

Sun TV Network reported its results with PAT or Net Profit increased by 11.31% at Rs. 1975.70 million

compared to Rs. 1775.00 million in the corresponding quarter of the previous year. Net Sales rose by 10.05% at

Rs. 5201.80 million from Rs. 4726.70 million in the corresponding quarter of the previous year. EBDITA was at

Rs. 4132.00 million as against Rs. 3702.00 to corresponding quarter of the previous year. Profit Before Tax rose

by 12.85% at Rs. 3002.8 million in Q4 FY14. Total income jumped by 8% from Rs. 5333.5 million to Rs. 4943.00

million in current quarter. Subscription revenues maintain robust growth of 25% quarter on quarter and year on

year.

During the year ended 31st, March 2014, the Revenues was up by 15% at Rs. 20967.80 million as against Rs.

18176.20 million and with the other income of Rs. 792.10 million the Total income was up by 16% at Rs.

21759.90 million as against Rs.18726.40 million in the previous year. The EBDITDA was up by 6% at Rs.

14633.80 million and Net profit (PAT) also up by 5% at Rs. 7169.60 million in comparison to Rs. 6833.4 million

for the previous year. In addition to that, the company stands debt free with no long or short term debt which is

extremely positive in the present scenario. The company is expected to improve its profitability in the coming

quarters. Thus we recommend BUY for the scrip with the target price of Rs 473.00 in the medium and long

term.

QUARTERLY HIGHLIGHTS (PARENT BASIS)

Results Updates- Q4 FY14

SUN TV NETWORK LTD (Sun TV) was incorporated in

1985 and is engaged in producing and broadcasting

satellite television and radio software programming has

reported its financial results for the quarter ended 31

MARCH, 2014.

The company’s net profit jumps to Rs. 1975.70 million against Rs. 1775.00 million in the corresponding quarter

ending of previous year, an increase of 11.31%. Revenue for the quarter rose by 10.05% to Rs. 5201.80 million

from Rs. 4726.70 million, when compared with the prior year period. Reported earnings per share of the

company stood at Rs. 5.01 a share during the quarter as against Rs. 4.50 over previous year period. Profit before

interest, depreciation and tax is Rs. 4132.00 million as against Rs. 3702.00 million in the corresponding period of

the previous year.

Months Mar-14 Mar-13 % Change

Net Sales 5201.80 4726.70 10.05

PAT 1975.70 1775.00 11.31

EPS 5.01 4.50 11.31

EBITDA 4132.00 3702.00 11.62

Break up of Expenditure

Latest Updates

• Subscription Revenues maintains robust growth of 20% quarter on quarter and year on year.

• FM Radio operations maintain revenue growth of 20% year on year and reporting 18% PAT margins.

• During the year ended 31st , March 2014, the Revenues was up by 15% at Rs. 20967.80 million as against Rs.

18176.20 million and with the other income of Rs. 792.10 million the Total income was up by 16% at Rs.

21759.90 million as against Rs.18726.40 million .

• For the year ended 31st march 2014, EBITDA was up by 6% at Rs. 14633.80 million and Net Profit (PAT) also

up by 5% at Rs. 7169.60 million in comparison to Rs. 683.34 million for the previous year.

• The Company has recommended a final dividend of 45% Rs. 2.25 per share of face value Rs. 5.00 each. This is

in addition to the interim dividend of Rs. 2.25 per share (45%), Rs. 2.50 per share (50%) and Rs. 2.50 per

share (50%).

Break up of Expenditure

(Rs in millions)

Q4 FY14 Q4 FY13

CHNG

%

Material and related cost 435.1 474.7 (8)

Employee Benefit Expenses 506.3 444.5 14

Depreciation &

Amortization Expense 1123.3 1016.9 10

Other Expenses 260.1 321.8 (19)

COMPANY PROFILE

Sun TV Network Limited (Sun TV) was incorporated in 1985 and is based in Chennai, India. The company is

engaged in producing and broadcasting satellite television and radio software programming in the regional

languages of South India. The company operates in a single segment Broadcasting. The Company operating

satellite television channels across four languages of Tamil, Telugu, Kannada and Malayalam.

Sun TV Network Limited, India's largest media Conglomerate has power packed Thirty Three TV Channels with

the reach of more than 95 million households in India. Sun TV Network's channels can be

Viewed in 27 countries including U.S.A, Canada, Europe, Singapore, Malaysia, Srilanka, South Africa, Australia and

New Zealand. The company provides entertainment in various genres of general entertainment, news, music,

action, life, movies, kids, and comedy.

In addition, the company undertakes production and distribution of movies in the Tamil language; provides

airline services under the SpiceJet brand; and operates Indian Premier League franchise under the SunRisers

Hyderabad name. Further, it offers direct to home satellite television services under the Sun Direct and Sun

Direct HD brands.

Products

� TELEVISION CHANNELS: In 4 different languages

• Tamil

• Telugu

• Kannada

• Malayalam

� PRINT MEDIA

• News Papers

• Magazines

� RADIO STATIONS

Services

• Sun Direct

It offers direct to home satellite television services under the Sun Direct and Sun Direct HD brands. Sun

Direct uses the latest MPEG-4 based technology to increase broadcast capacity. Sun Direct confirms to

provide next-generation services in fast-growing and emerging markets quickly and efficiently.

• 45 FM Radio Stations across India

Sun Group's forayed into FM radio. The top slot is a result of a carefully planned thoroughly enjoyable, round-

the-clock, wholesome entertainment-oriented package and there is a substantial localization of content to

retain the regional flavor.

• SunRisers Hyderabad

During the year, the Company successfully bid for the Indian Premier League (IPL) Franchise offered by the

Board of Control for Cricket in India (BCCI).

FINANCIAL HIGHLIGHT (PARENT BASIS) (A*- Actual, E* -Estimations & Rs. In Millions)

Balance Sheet as at March 31, 2013 -2016E

FY13A FY14A FY15E FY16E

SOURCES OF FUNDS

Shareholder's Funds

Share Capital 1970.40 1970.40 1970.40 1970.40

Reserves and Surplus 26958.10 29747.60 32722.36 35340.15

1. Sub Total - Net worth 28928.50 31718.00 34692.76 37310.55

Non Current Liabilities

Deferred Tax Liabilities 284.40 259.70 244.12 253.88

Other Long term Liabilities 41.70 35.20 38.72 41.04

Long term Provisions 17.20 8.80 9.86 10.84

2. Sub Total - Non Current Liabilities 343.30 303.70 292.69 305.77

Current Liabilities

Trade Payables 291.90 317.80 343.22 360.39

Other Current Liabilities 1441.30 1353.20 1407.33 1463.62

Short Term Provisions 936.30 1093.20 1224.38 1322.33

3. Sub Total - Current Liabilities 2669.50 2764.20 2974.94 3146.34

Total Liabilities (1+2+3) 31941.30 34785.90 37960.39 40762.66

APPLICATION OF FUNDS

Non-Current Assets

a) Fixed Assets 12229.00 12422.40 13167.74 13826.13

b) Non-current investments 4623.80 4623.80 4762.51 4953.01

c) Long Term loans and advances 3843.70 2417.20 2610.58 2741.10

1. Sub Total - Non Current Assets 20696.50 19463.40 20540.83 21520.25

Current Investment 54.60 2142.70 2514.56 2792.23

Inventories 5.00 5.70 6.16 6.53

Trade receivables 5353.00 5744.60 6031.83 6273.10

Cash and Bank Balances 3886.30 5621.00 6913.83 8089.18

Short-terms loans & advances 1177.50 1017.80 1099.22 1176.17

Other current assets 768.40 790.70 853.96 905.19

2. Sub Total - Current Assets 11244.80 15322.50 17419.56 19242.41

Total Assets (1+2) 31941.30 34785.90 37960.39 40762.66

Annual Profit & Loss Statement for the period of 2013 to 2016E

Value(Rs.in.mn) FY13A FY14A FY15E FY16E

Description 15m 12m 12m 12m

Net Sales 18176.20 20967.80 22854.90 24683.29

Other Income 550.20 792.10 839.63 881.61

Total Income 18726.40 21759.90 23694.53 25564.90

Expenditure -4407.30 -6334.00 -6467.94 -6861.96

Operating Profit 14319.10 15425.90 17226.59 18702.95

Interest -47.90 -45.40 -34.50 -29.33

Gross profit 14271.20 15380.50 17192.09 18673.62

Depreciation -4131.80 -4533.40 -4896.07 -5189.84

Profit Before Tax 10139.40 10847.10 12296.01 13483.78

Tax -3306.00 -3677.50 -4168.35 -4517.07

Net Profit 6833.40 7169.60 8127.67 8966.71

Equity capital 1970.40 1970.40 1970.40 1970.40

Reserves 26958.10 29747.60 32722.36 35340.15

Face value 5.00 5.00 5.00 5.00

EPS 17.34 18.19 20.62 22.75

Quarterly Profit & Loss Statement for the period of 30th Sep, 2013 to 30th June, 2014E

Value(Rs.in.mn) 30-Sep-13 31-Dec-13 31-Mar-14 30-Jun-14E

Description 3m 3m 3m 3m

Net sales 4664.10 5083.40 5201.80 5930.05

Other income 378.00 148.50 131.70 139.60

Total Income 5042.10 5231.90 5333.50 6069.65

Expenditure -1287.30 -1363.20 -1201.50 -1636.69

Operating profit 3754.80 3868.70 4132.00 4432.96

Interest -9.00 -23.40 -5.90 -4.96

Gross profit 3745.80 3845.30 4126.10 4428.00

Depreciation -1175.60 -1060.60 -1123.30 -1246.86

Profit Before Tax 2570.20 2784.70 3002.80 3181.14

Tax -878.60 -926.80 -1027.10 -1078.41

Net Profit 1691.60 1857.90 1975.70 2102.73

Equity capital 1970.40 1970.40 1970.40 1970.40

Face value 5.00 5.00 5.00 5.00

EPS 4.29 4.71 5.01 5.34

Ratio Analysis

Particulars FY13A FY14A FY15E FY16E

EPS (Rs.) 17.34 18.19 20.62 22.75

EBITDA Margin (%) 78.78 73.57 75.37 75.77

PBT Margin (%) 55.78 51.73 53.80 54.63

PAT Margin (%) 37.60 34.19 35.56 36.33

P/E Ratio (x) 24.16 23.03 20.32 18.41

ROE (%) 23.62 22.60 23.43 24.03

ROCE (%) 63.78 62.93 63.77 64.04

Debt Equity Ratio 0.00 0.00 0.00 0.00

EV/EBITDA (x) 11.26 10.20 9.04 8.25

Book Value (Rs.) 73.41 80.49 88.03 94.68

P/BV 5.71 5.21 4.76 4.43

Charts

OUTLOOK AND CONCLUSION

� At the current market price of Rs.419.000, the stock P/E ratio is at 20.32 x FY15E and 18.41 x FY16E

respectively.

� Earnings per share (EPS) of the company for the earnings for FY15E and FY16E are seen at Rs. 20.62 and Rs.

22.75 respectively.

� Net Sales and PAT of the company are expected to grow at a CAGR of 11% and 9% over 2013 to 2016E

respectively.

� On the basis of EV/EBITDA, the stock trades at 9.04 x for FY15E and 8.25 x for FY16E.

� Price to Book Value of the stock is expected to be at 4.76 x and 4.43 x respectively for FY15E and FY16E.

� We recommend ‘BUY’ in this particular scrip with a target price of Rs.473.00 for Medium to Long term

investment.

INDUSTRY OVERVIEW

Introduction

The Indian Media and Entertainment (M&E) industry is one of the most vibrant in the world and has a significant

impact on the Indian economy. The sector is expected to grow at a compound annual growth rate (CAGR) of 14.2

per cent over 2013–18, by which time it is projected to become a Rs 1786 billion (US$ 29.51 billion) industry.

The industry grows seemingly with each passing day and plays a critical role in creating awareness on several

issues that impact the masses.

India has a population of over 1.2 billion. The sheer numbers give the M&E industry in the country a tremendous

opportunity for growth. Some time back, the thought of reaching and engaging with such a vast and diverse

population seemed improbable. That has changed today. The current industry is armed with digital technologies,

state-of-the-art mobile devices, penetration of broadband and digital cinema, and a government that fully backs

the sector.

Market Dynamics

India’s advertising market is estimated to be US$ 5 billion, according to the Gunn report. The report also names

McCann World-Group India (Mumbai) as the agency to have won most advertisement awards.

The Indian print industry is the second largest in the world and is continuing to grow at a good rate. The industry

is expected to reach about US$ 20.9 billion by 2015, which would make it the biggest in the world.

The television segment is also growing at a good rate. It enjoyed a CAGR of 12.7 per cent to garner Rs 417.2

billion (US$ 6.89 billion) in 2013.

Advertising, Online and Mobile Entertainment

Digital media advertising grew faster than any other advertising category in 2013. Streaming and download

services witnessed growth in the music industry, with smart phones contributed significantly to increased

consumption of music.

Also, the total internet user base in the country reached around 214 million in 2013 with nearly 130 million

visiting online sites using mobile devices. Mobile internet users dominated the internet user base with a share of

61 per cent. India is estimated to have gained a mobile phone user base of more than 900 million by the end of

2013, and the country is today the third largest Smartphone market in the world.

Times Internet (TIL), has signed a partnership with Ziff Davis Inc., an American publisher and Internet company

that attracts 120 million in-market buyers monthly. As part of the partnership, Times Internet will have exclusive

rights to the IGN and AskMen brands – the premium gaming and men’s lifestyle sites respectively – and their

content in the country. This partnership will further enhance TIL’s growth as a digital community for Indian

consumers who are avid followers of games, entertainment and lifestyle.

Investments

• Guardian Corporation has entered the M&E industry with the establishment of Guardian Media and

Entertainment.

• Broadcast Audience Research Council (BARC) has entered into an agreement with France’s Mediametrie for

technology services and licensing for the audience measurement system. The French company will offer

technological knowledge and licenses to BARC, and also help the latter procure its own metering hardware.

Mediametrie has been engaged in multi-media audience research in France for the last 25 years.

• Developers of Entertainment City, Noida, have entered into an agreement with PVR to establish India’s

largest superplex with 15 screens. It has also tied up with Mexican chain of family entertainment centres,

KidZania, to set up an indoor theme park. The two projects are expected to open by the summer of 2015.

• Digital music services company Rdio has signed an agreement to acquire Pune-based music streaming

service, Dhingana for an undisclosed amount. San Francisco-based Rdio was founded by Mr Janus Friis, co-

dreator of Skype; it is available in 51 countries.

• India is the world’s fastest growing market for audio visual (AV) equipment, according to an industry study

by InfoComm. The AV market in India is projected to enjoy a CAGR of 25 per cent and reach US$ 5.1 billion by

2015, driven by expenditures in sectors such as education, infrastructure and corporate information

technology. By 2015, India could become the third largest AV market in the Asia–Pacific region.

Government Initiatives

The Indian and Canadian governments have signed an audio-visual co-production deal. The agreement is

expected to benefit producers from the two countries to pool their artistic, technical, financial and marketing

resources, which could lead to an exchange of culture and art. The agreement is also expected to enhance the

utilisation of Indian locales for shooting films. “The agreement will also lead to the transparent funding of film

production and boost export of Indian films into the Canadian market.

India and Poland will be expanding their co-operation in the restoration and digitization of film archives. This

was agreed in a meeting between Mr Bimal Julka, Secretary of Information and Broadcasting, India, and the high-

level Polish delegation headed by Secretary of State Ms Malgorzata Omilanowska. The two countries have also

agreed to form a Joint Working Group that will help to enhance co-operation in student exchange programmes,

films, animation, digitization, and similar areas of mutual benefit.

The Centre has given the go ahead for licences to 45 new news and entertainment channels. Established names

such as STAR, Sony, Viacom and Zee are among the broadcasters that have secured the licences. Presently, there

are 350 broadcasters which account for 780 channels.

Road Ahead

The biggest hope for the future of India’s M&E industry continues to be the digital area. With a burgeoning

internet user base of more than 200 million users, the potential of the industry to generate revenue is vast. In

2013, telecom companies began to focus on data as a means to generating revenue, and advertising agencies

began a competition to acquire in the digital and social media domains. All these suggest a bright future for the

M&E industry in the country.

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale

of any financial instrument or as an official confirmation of any transaction. The information contained herein is

from publicly available data or other sources believed to be reliable but do not represent that it is accurate or

complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall

not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the

information contained in this report. This document is provide for assistance only and is not intended to be and must

not alone be taken as the basis for an investment decision.

Firstcall India Equity Research: Email – info@firstcallindia.com

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