Here’s Why Brokerages See Strong FY19 For Sun TV 

Most brokerages maintained their stance on Sunrisers Hyderabad franchise owner - Sun TV Network Ltd. and Royal Challengers Bangalore owner - United Spirits Ltd., after the Indian Premiere League media rights auction on Monday.

IPL media rights were sold for Rs 16,347 crore, higher than what brokerage house CLSA had estimated at about Rs 9,500 crore to 12,500 crore in a report ahead of the deal.

Here’s what brokerages had to say about Sun TV after the IPL media rights auction:

CLSA

• Stock Rating: Maintain Buy
• Target Price: Revised to Rs 965 from Rs 890
• Upgrade FY19 IPL revenues by 45 percent
• Forecast Sun TV to earn price-to-book (PBT) of Rs 150-170 crore in FY19-20, compared to average loss of Rs 23 crore over FY17-18 from IPL
• Subscription outlook is strong, with digitisation rolling in Tamil Nadu
• Subscription revenue to grow at CAGR of 20 percent over FY17-20

Credit Suisse

• Stock Rating: Maintains Outperform
• Target Price: Rs 980
• Sun TV’s will witness a very strong FY19 with both the IPL and Tamil Nadu digitisation
• Sun TV’s subscription growth to accelerate to above 25 percent
• Upgrade FY19 IPL revenues by 45 percent
• Sun TV will be able to get Rs 20 per subscription in Tamil Nadu on the back of digitisation

Edelweiss

• Stock Rating: Maintains Buy
• Target Price: Unchanged at Rs 1,051
• So far Sun TV paid fixed franchise fee of Rs 85.5 crore. This will change to 20 percent of revenue as per new structure.
• Assuming similar revenue trends, that is Rs 150 crore per year, the company will incur Rs 30 crore as franchise cost. Thus, Sun TV will see Rs 50 crore increase in EBITDA.

IDFC Securities

• Stock Rating: Maintains Outperform
• Target Price: Revised to Rs 949 from Rs 893
• Upgrade FY19 EPS Estimates by 4 percent
• Revise target price on the back of 25.6 times FY19 EPS estimates
• The recent loss in all day market-share in Tamil Nadu has raised some concerns. However expect this a temporary phenomenon, led by one-off high-cost reality show on a competing network
• Expect ad growth to revive sharply from Q3FY18 estimates onwards
• Sun TV has better return ratios and better free cash flow (FCF) to EBIT ratio, compared to Zee
• Sun TV’s fiction market-share, key driver of ad revenue, continues to remain strong

Also Read: Why Star India Will Pay More To Broadcast IPL Than International Tests

On Royal Challengers Bangalore-Owner United Spirits Ltd.

CLSA

• Stock Rating: Maintain Sell
• Target Price: Hiked to Rs 1,750 from Rs 1,600
• Upside from IPL drives 13-15 percent EPS upgrades to FY19-20
• Maintain stock rating on earnings risk due to a tough regulatory environment
• Continue to value alcohol business at 22 times EV/EBITDA
• Value IPL at $380 million

IDFC Securities

• Stock Rating: Maintains ‘Underperform’
• Target Price: Hiked to Rs 2,378
• The significant increase in outlay for IPL broadcast rights will result in increase in the central pool revenue for the IPL franchisees from FY19
• Expect pressure on volumes and EBITDA margin uncertainty to weigh on financials in the medium term
• Valuations at 30 times FY19 EBITDA estimates remain prohibitive despite earnings upgrade
• Factoring in Rs 110 crore incremental revenue from central rights income for RCSPL in FY19 estimates