For the quarter ended December, Sun TV Network Ltd announced better-than-expected results, but that’s mainly due to the spectacular performance of the movie Endhiran.
The company’s reported revenue in the December quarter increased by 51% over the same period last year to about Rs600 crore. The reported revenue includes revenue worth Rs150 crore relating to Endhiran. Excluding that, growth in revenue was 13%.
Advertising revenue increased by 16% and accounted for 43% of reported revenue. Some analysts are disappointed with Sun TV’s advertising revenue growth. That’s because the festival season got shifted to the third quarter this fiscal, which was supposed to result in good revenue growth from advertising. Also, last fiscal, the festival season was in the second quarter.
According to analysts from Elara Securities (India) Pvt. Ltd, ad revenue growth is expected to come down to 5% in Q4 FY11E as a considerably high base in Q4 FY10 coupled with the presence of Cricket World Cup in Q4 FY11E act as dampeners. “The extraordinary growth during H1 FY11 establishes a higher base for FY12E, we expect the ad revenue growth for FY12E and FY13E to average at 18.5% y-o-y (year-on-year),” wrote analysts from Elara in a post-results note.
Even as the direct-to-home (DTH) and cable segment revenue registered robust y-o-y growth, sequentially growth was flattish. However, Sun TV expects strong growth in revenue from the DTH segment in the current quarter, as deals with most DTH operators are coming up for renewal.
Operating profit margin, which otherwise has expanded by 480 basis points to 84%, has fallen by 62 basis points to 78.5%, excluding the impact of Endhiran revenue. Reported net profit increased by 48% to Rs225 crore, but profit without taking gains from Endhiran increased by 27% to Rs193 crore.
Currently, at Rs491 per share, Sun TV is trading at about 23 times its estimated earnings for FY12. The firm commands premium valuations because of its dominance in the high-growth regional markets. That should continue.