After four straight quarters of revenue and net profit decline on a year-on-year (y-o-y) basis, Sun TV Network Ltd’s December quarter financial performance was a positive surprise, beating Street expectations. Double-digit growth in advertising compared with single-digit growth in the first half of the fiscal year boosted performance. Subscription revenue rose 16%, reflecting the full impact of the Arasu deal.
Sun TV’s revenue in the December quarter rose by 14% over the same period last year to Rs.486 crore. In comparison, in the September and June quarters, revenue had fallen by 4% and 6%, respectively. In the December quarter, advertising revenue increased by 20% to Rs.293 crore. It naturally looks far better than the 4-5% growth seen in the past two quarters. Of course, the past quarter was helped by a lower base, festive season impact and higher advertising spending in many sectors.
Although net profit increased by 13% to Rs.190 crore, operating performance deteriorated. Operating profit margins declined by 280 basis points on a y-o-y basis to 77.4%. A basis point is 0.01%.
All components of cost increased at a relatively faster pace. What offers comfort though is operating margin in the three months ended December was better than the preceding two quarters.
However, shareholders for now don’t seem to be too worried about the annual decline in margin. The recovery in growth rates in revenue and net profit is heartening. Moreover, outlook on advertising revenue, too, has improved. No wonder the stock has risen by about 5% since the company announced its December quarter numbers last week. The benchmark Sensex remained about 0.6% higher in the same period.
So far in this fiscal year, the Sun TV stock has gained about 46% against the 15% increase in the BSE-200 index. At Rs.456, it trades at around 21 times estimated earnings for the next fiscal year starting April. In comparison, peer Zee Entertainment Enterprises Ltd’s stock trades at about 25 times estimated 2013-14 earnings. It suggests there might be some more juice left for the Sun TV stock.