SUN TV reported a revenue increase of 9.6% YoY to Rs 8.3 billion (in-line), with advertising revenue increased by 40% YoY to Rs 3.4 billion for the quarter and six months ended on September 30, 2021.
The revenues reached the pre-pandemic levels of Rs 3.4 billion as of Q2FY20. At the same time, the subscription revenue declined by 4.5%. The overall revenues exceeded pre-pandemic levels and were up 7% v/s pre-COVID levels of Q2 FY20. This was largely attributable to the spillover of delayed IPL revenues of Rs 520 million.
The EBITDA stood at Rs 5.2 billion, up 3.7% YoY (in-line), aided by revenue growth. The net profit increased by 13.7% YoY to Rs 3.9 billion.
The de-growth in ad revenues in 1HFY22 would be neutralized in 2HFY22. Subscription revenue would grow in the double digits for FY22, aided by the sale of digital rights and contract renewals.
The company has plans to invest more than Rs 2.5 billion annually in movies, in addition to Rs 4.5-5 billion in purchasing satellite rights.
Investments towards original content for the network’s OTT platform Sun Next are expected to happen post Mar’22 as the company focuses on the existing movie production line-up.
Sun TV’s healthy liquidity, with net cash of over Rs 32.3 billion presently, offers room to intensify investments in the linear as well as OTT space – along with high dividend payout potential (45-85% payout policy) and low valuation offer support. Furthermore, adjusted for the recent high auction price from the new IPL teams, the stock is at below 10x on a Sep’23E basis.
However, an inherent risk is that while investments in movie production have delayed OTT investments by two years (now guided for FY23), the monetization of the existing library remains a key concern as it has a risk of further delay.
The results for the quarter and six months ended September 30, 2021 includes income from the Company’s IPL franchise “SunRisers Hyderabad” for season 2021 (partial) of Rs.51 .63 crores and Rs.175.55 crorcs respectively (Quarter and six months ended September 30. 2020 for season 2020 (Partial) of Rs. 45.41 crores) and corresponding costs of Rs.39.30 crores and Rs.11 7.04 crores respectively (Quarter and six months ended September 30, 2020 for season 2020 (partial) of Rs. 31.83 crores).
With effect from April I, 2021, the management has reassessed the estimated useful life of film broadcasting rights (satellite rights) based on the pattern of the expected future economic benefits and accordingly, has decided to amortize the cost of such rights over a period of four years, from the date of first telecast of the film, in a graded manner in line with the prevailing industry practices in India and across the world.
