Sun TV Network rating – Neutral: Results were largely in line with estimates

On film manufacturing, it plans to spend ~Rs 10 bn over the subsequent two years.

Q4FY21 income/EBITDA at Rs 7.8/ 5.5 bn have been largely in step with our estimates (Rs 8/5.4 bn) however above consensus (Rs 7.7/5.2 bn). Commercial income rose ~7% y-o-y (-11% vs Q4FY19), weaker than peer Zee (~9% y-o-y, -8% vs Q4FY19). Subscriptions rose ~7% y-o-y. However, DPS of solely Rs 5 (~13% payout) in FY21 vs Rs 25 (72% payout) in FY20 and no buy-back announcement have been key disappointments.

Commentary: Solar’s prime time market share in its flagship channel, SunTV, improved to 42% in April from ~37% in FY21. Going forward, it plans high-cost non-fiction reveals in Telugu/Malayalam and regain share. It targets to develop subscription income in double-digits in FY22F led by ongoing digitisation. On film manufacturing, it plans to spend ~Rs 10 bn over the subsequent two years.

Our view: Whereas Solar’s Tamil viewership share has remained steady, it has misplaced share within the Telugu and Malayalam genres. We consider the structural development restoration of Solar is contingent on: (i) sustained market share good points in current genres (Tamil, Telugu and so on); (ii) success in new genres like Marathi, Bengali; and (iii) rising give attention to OTT content material (to this point, Solar’s focus has been restricted in contrast with friends) and threat of potential shift in promoting/subscription traits in direction of digital platforms.

We marginally revise estimates – advert income development of 27%/10% in FY22/23F (+29%/8% earlier), subscription income development of seven%/8% (6%/5% earlier), resulting in a -2%/-1% change in income estimates for FY22/23F. We consider 65.8%/62.2% Ebitda margins (63.7%/61.6% earlier), resulting in largely unchanged EPS estimates.

Valuation: Trim TP to Rs 601
Present valuation at ~13.3x FY23F EPS is just not costly, contemplating Solar has internet money of Rs 41 bn or ~Rs 102 per share, ~20% of market cap and ~8%/7% FCF yield on FY22/23F. Nonetheless, re-rating catalysts will rely upon enhancing development visibility. We preserve our goal PE at 15x on FY23F EPS to reach at our TP of Rs 601 (Rs 602 earlier). Preserve Impartial. Considerably increased worth of IPL group in long run is a possible upside. Additional market share loss in Tamil style is a draw back threat.