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Macquarie
Sun TV (Outperformer)
CMP: ₹816.35
Target: ₹975
We initiate coverage on Sun TV, the dominant TV broadcaster in South India. Our analysis of the Tamil Nadu State-run cable company Arasu’s likely digital cable offering leads us to believe that Sun TV is well-placed to take
advantage of resolution of the TV digitisation logjam.
We expect Sun TV to report about 11 per cent ad revenue CAGR over FY17-20E, aided also by improved market share in Telugu language programming, ongoing efforts to improve its ranking in Kannada and Malayalam and its continued supremacy in Tamil.
Our FY18/FY19 EPS estimates are 5/9 per cent ahead of consensus, primarily due to higher margins as we factor in the subscription upside in TN.
Key risks: Slower progress of digitisation in TN/ Arasu establishing a credible digital cable service, increase in competition from national broadcasters and strict implementation of 12-minute ad cap could pose risks to our estimates. The biggest risk to our recommendation would be Sun TV’s promoters being convicted by higher courts in the ongoing Aircel-Maxis case (next hearing on August 29).
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