Optimistic on Sun NXT – Sun TV

Update on the Indian Equity Market:

On Wednesday, Nifty closed in the red at 15,107. Among the sectoral indices, Realty (+1.6%), Pharma (+0.7%), and IT (+0.4%) closed higher. PVT Bank (-0.7%), Fin Services (-0.2%) and FMCG (-0.1%) closed in the red. Cipla (+2.8%), Bajaj Finserv (+2.8%), and SBI Life (+2.7%) closed on a positive note. Eicher Motors (-2.2%), Bharti Airtel (-1.6%), and HDFC Bank (-1.2%) were among the top losers.

Excerpts from an interview of Mr. SL Narayan, CFO, Sun Group with CNBC-TV18 dated 09^th February 2021:

• The company expects double-digit growth across financials.
• Narayan said things are looking good since January-21.
• The advertising revenues are still lagging but the company is in a better position as compared to Q1FY21.
• The company was impacted more as compared to large peers because of its dependence on local revenues.
• He said the entire ecosystem is affected and hence there is some impact on the company as well.
• On Sun NXT, he said the company had a large contract that came up for renewal. However, the negotiations couldn’t be concluded on time and its revenues were not recognized in Q3FY21.
• Speaking about subscribers for Sun NXT, he said the company is not spending on customer acquisition because they don’t want to build an OTT at a significant upfront investment.
• Movie releases will bring back the growth in subscription revenues.
• A lot of new movies will be hitting the screen in coming times.

Consensus Estimate: (Source: market screener website)

• The closing price of Sun TV was ₹ 528 as of 10-February-2021.  It traded at 15x/13x/12x the consensus Earnings per share estimate of ₹ 35.8/39.3/42.3 for FY21E/FY22E/ FY23E respectively.
• The consensus average target price is ₹ 566/- which implies a PE multiple of 13x on FY23E EPS of 42.3/-.

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