Sun TV Network Ltd posted strong numbers for the quarter ended March. Stand-alone revenues of the company registered a 42% increase over the same period last year to Rs391.9 crore beating market estimates.
Better inventory utilization, new channels and increased corporate spending from auto, retail, telecom and personal and home care products sectors boosted advertising revenue, which at Rs222.1 crore accounted for more than half of its total revenue.
The company has guided for an 18% increase in ad revenue for the current fiscal. Analysts though are more positive. “We expect solid advertising revenue growth at 21% CAGR (compounded annual growth rate) over FY10-FY12E, higher than the industry growth, albeit slower than its historical ad growth rates,” wrote Citigroup analysts in note on Wednesday.
Graphic: Yogesh Kumar/Mint
Direct-to-home-based subscription revenue increased by 94.1% to Rs62.9 crore. The subscriber base increased to around six million at the end of March from 5.7 million at the end of December.
Operating performance was strong with profit margins expanding by 262 basis points to 84.4% from 81.8% last year. One basis point is one-hundredth of a percentage point.
Operating margins got a boost from 36.5% drop in staff cost, as directors decided not to take an increase in their remuneration. At the net level, Sun’s profits increased by 44.8% to Rs165.1 crore.
While overall numbers were good, Sun’s radio and movie business have been a drag. Losses from the radio division stood at Rs58 crore for FY10.
Revenue from the movie business in FY10 stood at Rs67.5 crore and return on investment dropped to 12.5% in FY10 from 17% in FY09.
At Rs402.55, the stock trades at 22.6 times its estimated earnings for 2011. High competition in the regional markets and radio business losses are likely to play spoilsport on stock performance in the days to come.
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