Sun TV Network Q2 Results Review

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Sun TV Network Ltd.’s Q2 FY23 was in-line and weak. Broadcast business revenue/Ebit/adjusted profit after tax are up 2.4/down 5/up 4.3% YoY. 

Sun TV is trading at an attractive 13/12.6/12.1 times FY23/24/25E earnings per share. The company’s strong balance sheet with C&CE of ~Rs 50 billion (~23% of midcap) and leadership in Tamil market drives comfort.

IPL bids (Rs 51 and Rs 71 billion for two new teams) and three times IPL bids at ~Rs 480 billion versus last cycle provide additional upside in the long-term from value unlocking perspective.

But, Sun TV’s under-investment in core broadcast/digital business remains a key constraint from future proofing of business perspective. Low dividend payout with mountain of cash raise fears of capital misallocation.

These have been constraining factors for rerating and likely to continue so despite attractive valuations. Sun TV is a potential acquisition candidate in our view and event surrounding acquisition may drive significant re-rating.

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