3QFY2013 Result Update | Media

January 23, 2013

SUN TV Network
Performance Highlights
Quarterly data (Standalone)
(` cr) Revenue EBITDA OPM (%) PAT 3QFY13 486 376 77.5 190 3QFY12 425 341 80.2 168 % yoy 14.3 10.3 (279)bp 13.1 2QFY13 433 329 75.9 152 %qoq 12.1 14.4 153bp 25.2

NEUTRAL
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Net Debt (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Media 17,308 (490) 0.7 449/177 154,582 5 20,027 6,054 SUNTV.BO SUNTV.IN

`439 -

Source: Company, Angel Research

For 3QFY2013, Sun TV Network Ltd (STNL) reported a 14.3% yoy growth in its top-line to `486cr. The healthy top-line performance was driven by a robust 20.1% yoy growth in its advertising revenue to `293cr (on the back of all round increase in ad revenue across key sectors aided by festive season). Although the OPM contracted by 279bp yoy to 77.5%, net profit grew by 13.1% yoy to `190cr. Subscription revenue grows 16.4% yoy Sun TV registered a 16.4% yoy increase in subscription revenue to `132cr mainly on account of a 12.5% yoy growth in the DTH segment to `95cr and 27.6% yoy growth in Analogue segment to `37cr (aided by `7.5cr from Arasu deal). The management expects to maintain healthy growth in subscription revenue aided by 2nd phase of digitalization in its key markets of Bangalore, Hyderabad, Mysore, Coimbatore and Visakhapatnam (with 4.5mn potential digital subscribers). Among other segments, international revenue grew by 8.3% yoy to `26cr while broadcast fee declined 17.1% yoy to `34cr. Outlook and valuation: Sun TV is expected to be among key beneficiaries of mandatory digitization due to its strong presence in South India. At the current market price, STNL is trading at 21.2x FY2014E consolidated EPS of `20.7. We believe the stock is fairly valued and would prefer to wait for a better entry opportunity. Hence, we recommend Neutral on Sun TV.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 77.0 2.2 13.8 7.0

Abs. (%) Sensex SUNTV

3m 7.0 23.4

1yr 19.5 57.8

3yr 18.8 15.5

Key financials (Consolidated)

Y/E March (` cr) Net sales % chg Net profit (Adj.) % chg EBITDA margin (%) EPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/EBITDA (x)
Source: Company, Angel Research

FY2011

FY2012

FY2013E

FY2014E

2,013 38.6 770 48.2 78.4 19.6 22.5 7.7 36.8 49.1 8.3 10.6

1,847 (8.3) 693 (10.0) 76.6 17.6 25.0 6.9 28.7 36.8 9.2 12.0

1,942 5.1 700 0.9 76.9 17.8 24.7 6.3 26.3 35.6 8.6 11.1

2,237 15.2 817 16.8 77.3 20.7 21.2 5.6 27.7 38.4 7.4 9.6
Amit Patil 022-39357800 Ext: 6839 amit.patil@angelbroking.com

Please refer to important disclosures at the end of this report

SUN TV Network | 3QFY2013 Result Update

Exhibit 1: Quarterly performance (Standalone)

Y/E March (` cr) Net Sales Cost of Revenue (% of sales) Staff cost (% of sales) Other expenditure (% of sales) Total Expenditure Operating Profit OPM (%) Depreciation & Amortization EBIT EBIT (%) Interest Other Income PBT (excl. Ext Items) Ext Income/(Expense) PBT (Incl. Ext Items) (% of Sales) Provision for Taxation (% of PBT) Recurring PAT PATM (%) Reported PAT Equity shares (cr) EPS (`)
Source: Company, Angel Research

3QFY13 486 34 7.0 48 9.8 28 5.8 110 376 77.5 104 272 56.0 1.7 11 281 281 57.8 91 32.4 190 39.1 190 39 4.8

3QFY12 425 25 5.9 40 9.5 19 4.4 84 341 80.2 112 229 53.8 3.6 23 248 248 58.4 80 32.4 168 39.5 168 39 4.3

% yoy 14.3 34.7 18.2 51.0 30.4 10.3 (7.2) 18.9 (53.9) (54.5) 13.1 13.1 13.1 13.1 13.1 13.1

2QFY13 433 34 7.8 43 9.9 28 6.4 104 329 75.9 114 215 49.7 1 10 224 224 51.8 73 32.4 152 35.0 152 39 3.8

% qoq 12.1 0.1 11.0 1.7 5.0 14.4 (8.3) 26.4 234.0 9.8 25.2 25.2 25.2 25.2 25.2 25.2

9MFY13 1,345 108 24.9 133 30.6 76 17.6 317 1,028 237.3 311 717 165.4 2 33 748 748 55.6 242 32.4 506 37.6 506 39 12.8

9MFY12 1,330 72 16.6 126 29.0 60 13.9 258 1,072 247.5 336 736 169.9 5 59 791 791 59.4 255 32.3 536 40.3 536 39 13.6

% chg 1.1 49.9 5.6 26.3 22.8 (4.1) (7.3) (2.6) (48.6) (43.5) (5.4) (5.4) (5.2) (5.6) (5.6) (5.6)

January 23, 2013

SUN TV Network | 3QFY2013 Result Update

Top-line growth led by robust 20.1% yoy growth in advertising revenue

During 3QFY2013, STNLs top-line grew by 14.3% yoy to `486cr driven by robust 20.1% yoy growth in its advertising revenue to `293cr (on the back of all round increase in ad revenue across key sectors aided by festive season). The company registered 16.4% yoy increase in subscription revenue to `132cr mainly on account of 12.5% yoy growth in DTH segment to `95cr and 27.6% yoy growth in Analogue segment to `37cr (aided by `7.5cr from Arasu deal). The management expects to maintain healthy growth in subscription revenue aided by 2nd phase of digitalization in its key markets of Bangalore, Hyderabad, Mysore, Coimbatore and Visakhapatnam (with 4.5mn potential digital subscribers). Among other segments, international revenue grew by 8.3% yoy to `26cr while broadcast fee declined 17.1% yoy to `34cr.

Exhibit 2: Top-line grows 14.3% yoy

700 600 500 (` cr) 400 300 200 598 461 454 451 425 427 100 3Q11 4Q11 1Q12 2Q12 3Q12 18 3 6 (7) 426 (6) 433 486 (4) 14 51 60 50 40 30 20 10 (10) (20) (30) (40) 1Q13 2Q13 3Q13 (%)

(29)

Top-line (LHS) Source: Company, Angel Research

Exhibit 3: Segmental revenue

350 300 250 (` cr) 200 150 100 50 Advertisement
3Q11 4Q11

293 261

53

70 37

4Q12 95 20

yoy growth (RHS)

26

42

34

Analog Subs.
1Q12 2Q12

DTH Subs.
3Q12 4Q12

International Subs.
1QFY13

Broadcast fees
3QFY13

2QFY13

Source: Company, Angel Research

January 23, 2013

SUN TV Network | 3QFY2013 Result Update

Exhibit 4: Revenue break-up

Y/E March (` cr) Advt. Income Broadcast Fee Program License Inc (Int. Rev) Subs Income Analogue Subs Income DTH Others (Incl. Movies) Total Revenue % of total revenue Advt. Income Broadcast Fee Program License Inc (Int Rev) Subs Income Analogue Subs Income DTH Others (Incl. Movies)
Source: Company, Angel Research

3QFY13 293 34 26 37 95 1 486

3QFY12 244 41 24 29 84 3 425

% yoy 20.1 (17.1) 8.3 27.6 12.5 (53.3) 14.3

2QFY13 245 37 26 34 90 2 433

% qoq 19.8 (8.11) 8.8 5.0 (22.2) 12.1

60.3 7.0 5.4 7.6 19.4

57.4 9.6 5.6 6.8 19.8

56.4 8.5 6.0 7.8 20.8

Net Profit grows 13.1% yoy in spite of 279bp yoy OPM contraction
The OPM for the quarter stood at 77.5%, a decline of 279bp yoy, largely on the back of 105bp yoy increase in cost of revenues to 7.0% of sales and 141bp yoy increase in other expenditure to 5.8% of sales. Staff costs as a percentage of sales also inched up by 33bp yoy to 9.8%. Staff costs stood at `48cr in 3QFY2013 against `40cr in 3QFY2012. In spite of margin pressure, net profit grew by 13.1% yoy to `190cr.

Exhibit 5: OPM contracts 279bp yoy

90.0 80.0 70.0 60.0 83.9 79.0 80.6 81.0 80.2 76.9 75.9 75.9 77.5

Exhibit 6: PAT grows by 13.1% yoy

250 200 (` cr) 150 100 225 208 188 180 168 159 164 152 190 50 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 48 60 26 10 8 (26) (24) (12) (16) 13 50 40 30 20

(%)

40.0 30.0 20.0 10.0 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 8.0 9.8 9.7 9.2 9.5 9.0 9.9 9.9 9.8

10 (10) (20) (30)

OPM

Staff cost (% of sales)

PAT (LHS)

yoygrowth (RHS)

Source: Company, Angel Research

Source: Company, Angel Research

January 23, 2013

(%)

50.0

SUN TV Network | 3QFY2013 Result Update

Investment arguments
DTH to be the growth driver: The second phase of digitization across 38 cities has started, the deadline for which is March 31, 2013. In this second phase, Sun TV has presence in five key cities: Bangalore, Hyderabad, Mysore, Coimbatore and Visakhapatnam with 4.5mn potential digital subscribers. The digitization drive across the nation and consumers shifting to superior-quality DTH/DAS from cable television is expected to plug distribution loopholes and lead to higher ARPUs for broadcasters. STNL, a leading broadcaster in the south Indian states of Tamil Nadu, Andhra Pradesh, Karnataka and Kerala is likely to be among the key beneficiaries from mandatory digitization.

Outlook and valuation

Sun TV is expected to be among key beneficiaries of mandatory digitization due to its strong presence in South India. At the current market price, STNL is trading at 21.2x FY2014E consolidated EPS of `20.7. We believe the stock is fairly valued and would prefer to wait for a better entry opportunity. Hence, we recommend Neutral on Sun TV.

January 23, 2013

SUN TV Network | 3QFY2013 Result Update

Exhibit 7: Peer valuation

Company SUN TV Zee Ent.* Reco Neutral Unrated Mcap (` cr) 17,308 21,510 CMP (`) 439 235 TP (`) #

Upside (%) -

P/E (x) FY13E 24.7 32.1 FY14E 21.2 27.0

EV/Sales (x) FY13E 8.6 5.8 FY14E 7.4 5

RoE (%) FY13E 26.3 18.8 FY14E 27.0 19.7

CAGR # Sales 10.1 17.0 PAT 8.6 17.6

Source: Company, Angel Research, *Bloomberg estimates, CAGR over FY201214E

Exhibit 8: Angel vs Consensus estimates

Top line (` cr) Angel estimates Consensus Diff (%)
Source: Company, Angel Research

FY2013E 1,942 1,941 0.1

FY2014E 2,237 2,296 (2.6)

EPS (`) Angel estimates Consensus Diff (%)

FY2013E 17.8 17.9 (0.6)

FY2014E 20.7 20.7 (0.2)

Exhibit 9: Return of Sun TV vs Sensex

140% 120% Sensex SUN TV

Exhibit 10: One-year forward P/E band

600 500
14x 17x 20x 23x

Share Price (`)

100% 80% 60% 40% 20% 0%

400 300 200 100

Jun-11

Aug-11

Jun-12

Aug-12

Apr-11

Oct-10

Oct-11

Apr-12

Dec-10

Dec-11

Oct-12

Feb-11

Feb-12

Dec-10

Dec-11

Aug-11

Aug-12

Aug-10

Source: Company, Angel Research

Dec-12

Source: Company, Angel Research

Company background
STNL is a leading broadcaster in the south Indian states of Tamil Nadu, Andhra Pradesh, Karnataka and Kerala. The company is promoted by Kalanithi Maran. The group is present across the media value chain, viz broadcasting, radio, films, cable distribution, DTH and print media. STNL has the largest broadcasting network in South India, with 20 channels in the GEC, kids, movies and news space. Besides TV broadcasting, STNL owns FM radio licenses for 45 cities. STNL has a strong movie library comprising more than 8,500 titles, with rights across all the four major south Indian languages. Apart from having an extensive movie library, STNL purchases around 90% of all movie releases in these languages.

January 23, 2013

Dec-12

Feb-11

Feb-12

Jun-10

Apr-10

Apr-11

Jun-11

Oct-10

Oct-11

Apr-12

Jun-12

Oct-12

SUN TV Network | 3QFY2013 Result Update

Profit & Loss Statement (Consolidated)

Y/E March (` cr)
Gross sales Less: Excise duty Net Sales Total operating income % chg Total Expenditure (Inc.)/ Dec. in stock in trade Cost of Production Staff Costs Power & Fuel Other Expenses EBITDA % chg (% of Net Sales) Depreciation& Amortisation EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) Share in profit of Associates Recurring PBT % chg Prior Period & Extra Exp/(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) Add: Share of earn of asso. Less: Minority interest (MI) PAT after MI (reported) ADJ. PAT % chg (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg

FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E

1,039 1,039 1,039 19.5 303 111 116 14 62 737 23.3 70.9 220 516 9.0 49.7 14 67 11.7 0.2 569 10.9 569 229 40.3 340 (28) 368 368 12.7 35.4 9.3 9.3 12.7 1,453 1,453 1,453 39.8 362 4 119 134 14 91 1,091 75.1 321 770 49.1 53.0 5 35 4.4 0.8 800 40.5 800 299 37.4 501 (18) 520 520 41.2 35.8 13.2 13.2 41.2 2,013 2,013 2,013 38.6 435 8 135 192 7 94 1,578 78.4 480 1,098 42.6 54.5 2 49 4.3 3.5 1,145 43.1 1,145 383 33.5 761 (6) 770 770 48.2 38.3 19.6 19.6 48.2 1,847 1,847 1,847 (8.3) 433 8 133 186 7 99 1,415 76.6 474 941 (14.3) 50.9 6 80 7.8 7.9 1,015 (11.3) 1,015 332 32.7 683 (2) 693 693 (10.0) 37.5 17.6 17.6 (10.0) 1,942 1,942 1,942 5.1 448 145 194 8 100 1,494 76.9 499 995 5.7 51.2 5 47 4.6 7.0 1,037 2.2 1,037 346 33.4 691 (2) 700 700 0.9 36.0 17.8 17.8 0.9 2,237 2,237 2,237 15.2 507 156 226 11 114 1,730 77.3 549 1,181 18.7 52.8 6 45 3.7 7.0 1,220 17.6 1,220 411 33.7 808 (2) 817 817 16.8 36.5 20.7 20.7 16.8

January 23, 2013

SUN TV Network | 3QFY2013 Result Update

Balance Sheet (Consolidated)

Y/E March (` cr) SOURCES OF FUNDS Equity Share Capital Preference Capital Reserves& Surplus Shareholders Funds Minority Interest Total Loans Deferred Tax Liability Total Liabilities APPLICATION OF FUNDS Net Block (incl. CWIP) Investments Non Current Assets Current Assets Cash Loans & Advances Other Current liabilities Net Current Assets Mis. Exp. not written off Total Assets 972 181 23 881 365 274 241 219 662 0 1,838 1,213 228 30 1,035 437 266 332 461 574 0 2,045 1,307 185 1,374 603 254 517 435 939 0 2,432 1,251 193 1,464 308 616 541 229 1,236 2,679 1,198 263 1,891 665 602 624 449 1,442 2,903 1,279 383 2,109 726 694 690 516 1,593 3,255 197 1,505 1,702 38 72 26 1,838 197 88 1,689 1,973 37 0 34 2,045 197 93 2,057 2,347 32 13 41 2,432 197 93 2,315 2,605 29 11 34 2,679 197 93 2,549 2,840 29 34 2,903 197 93 2,901 3,192 29 34 3,255 FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E

Note: FY12 balance sheet numbers as per revised schedule VI

January 23, 2013

SUN TV Network | 3QFY2013 Result Update

Cash Flow Statement (Consolidated)

Y/E March (` cr)
Profit before tax Depreciation Change in Working Capital Interest / Dividend (Net) Direct taxes paid Others Cash Flow from Operations (Inc.)/ Dec. in Fixed Assets (Inc.)/ Dec. in Investments Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Interest / Dividend (Net) Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances

FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E

569 220 56 (26) 202 30 649 (494) (9) (503) 6 (4) (184) 8 (174) (28) 394 365 800 321 (109) (29) 281 24 726 (554) (47) (602) 107 (73) (115) 29 (53) 71 365 437 1,145 480 (173) (36) 383 86 1,119 (554) 43 (511) 11 17 (505) 36 (442) 166 437 603 1,015 474 (140) (53) (332) (70) 894 (406) (263) (669) 2 (3) (572) 53 (520) (295) 603 308 1,037 499 (53) (36) (346) 10 1,111 (447) (70) (517) 2 (11) (265) 36 (237) 357 308 665 1,220 549 (93) (35) (411) 11 1,239 (630) (120) (750) 2 (466) 35 (428) 61 665 726

January 23, 2013

SUN TV Network | 3QFY2013 Result Update

Key Ratios
Y/E March
Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis EBIT margin Tax retention ratio Asset turnover (x) RoIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating RoE Returns (%) RoCE (Pre-tax) Angel RoIC (Pre-tax) RoE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Int. Coverage (EBIT / Interest) 0.4 0.1 37.4 0.0 0.0 155.9 0.1 0.0 488.0 0.1 0.0 161.7 198.9 196.9 0.7 0 85 16 104 0.8 1 83 10 34 0.7 0 86 10 61 0.6 0 108 9 183 0.6 0 111 8 146 0.6 0 111 8 142 30.2 45.7 21.6 39.7 57.6 27.9 49.1 72.6 36.8 36.8 49.2 28.7 35.6 47.9 26.3 38.4 57.3 27.7 49.7 0.6 0.8 24.6 0.1 0.4 33.3 53.0 0.6 0.9 28.5 0.1 0.2 33.7 54.5 0.7 0.9 31.5 0.2 0.0 32.6 50.9 0.7 0.6 21.5 0.3 0.1 22.7 51.2 0.7 0.6 19.9 0.6 0.0 20.4 52.8 0.7 0.6 21.0 9.3 9.3 10.3 2.5 43.2 13.2 13.2 14.9 7.5 47.8 19.6 19.6 21.5 8.8 57.2 17.6 17.6 20.2 9.5 63.7 17.8 17.8 20.6 10.1 69.7 20.7 20.7 23.9 10.1 78.6 47.0 42.5 10.2 0.6 16.0 22.6 9.1 33.3 29.4 9.2 1.7 11.5 15.3 8.1 22.5 20.4 7.7 2.0 8.3 10.6 6.8 25.0 21.8 6.9 2.2 9.2 12.0 6.2 24.7 21.3 6.3 2.3 8.6 11.1 5.7 21.2 18.4 5.6 2.3 7.4 9.6 5.1

FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E

January 23, 2013

10

SUN TV Network | 3QFY2013 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

SUN TV No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

January 23, 2013

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