Sun TV Network has reported 7 percent growth in consolidated Profit after tax amounting to Rs 368 Cr during the quarter ending 31st December 2019.
The channel saw yet another quarter of weak operating revenues due to a decline in ad revenue. Subs growth YoY too has not been up to the mark given the massive benefits of NTO 1.0 and TN digitisation opportunity.
However analysts at Elara Capital are surprised to see the positive on margin and suggest that it may not be sustainable given the heavy content investments Sun TV is making for thier OTT platfrom Sun NXt and transition towards commission based model on Sun TV.
Sun TV reported a decline in revenues by 9.9% YoY to Rs 8.1 bn which was lower than Elara capital’s estimate of Rs. 8.3 BN.
The primary reason cited for this is the sharp decline in movie distribution revenues by 86% YoY, which in values is Rs. 156 mn vs Rs. 1096 mn in Q3FY19. Excluding the movie distribution decline, the revenues grew 0.5% YoY.
Sun TV’s Advertisement revenues went down to Rs. 3.4 bn which is a significant drop of 11% YoY vs Elara Capital’s estimate of 15% YoY.
Subscription revenues for the quarter continued the double-digit growth of 18% YoY at Rs.4.1 bn as the benefits of NTO implementation continue for broadcasters and Sun TV benefitted from TN state digitisation.
However, EBITDA margins shrinked by 250bps YoY to 71.2%, as a surge in other operating costs by 24.2% YoY. Reported EBITDA Margins were way ahead of our estimate of 61% as the cost of revenues declined 9.9% instead of a surge expected on account of heavy content investments during the quarter.
PAT grew 6.2% YoY to Rs 3.7 bn higher than Elara’s estimate of Rs 2.9 bn due to higher other income and lower tax rates. Company has declared an interim dividend of INR 7.5/share.
