4QFY2013 Result Update | Media

May 20, 2013

SUN TV Network
Performance Highlights
Quarterly data (Standalone)
(` cr) Revenue EBITDA OPM (%) PAT 4QFY13 473 349 73.7 178 4QFY12 427 328 76.9 159 % yoy 10.7 6.2 (311)bp 11.6 3QFY13 486 376 77.5 190 %qoq (2.7) (7.4) (371)bp (6.5)

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 16,680 (611) 0.7 494/177 161,193 5 20,224 6,157 SUNTV.BO SUNTV.IN

`423 -

Source: Company, Angel Research

For 4QFY2013, Sun TV Network Ltd (STNL) reported a 10.7% yoy growth in its top-line to `473cr (better than our expectations), driven largely by healthy 14.6% yoy growth in its advertising revenue to `269cr (aided by low base effect). The advertising growth momentum is expected to continue with company hiking weekday prime-time ad rates by 19% for its flagship chanel, Sun TV. Subscription revenue grows 18.0% yoy: STNL registered 18.0% yoy increase in subscription revenue to `138cr, mainly on account of a 16.3% yoy growth in the DTH segment to `100cr and 22.6% yoy growth in Analogue segment to `38cr (aided by `7.5cr from Arasu deal). The management expects to maintain healthy growth in subscription revenue aided by 2 nd 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 18.2% yoy to `26cr while broadcast fee declined 20.0% yoy to `36cr. Operational Performance: STNLs OPM declined by 311bp yoy to 73.7% on account of increase in content cost. Usually, the content is outsourced to third parties. However, award nights and reality shows are produced in-house, leading to rise in content cost when expenditure is booked for such specialized shows. 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 18.2x FY2015E consolidated EPS of `23.3. 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 1.9 14.3 6.9

Abs. (%) Sensex SUNTV

3m 3.9 (4.3)

1yr 25.2 58.6

3yr 22.4 2.1

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

FY2012

FY2013E

FY2014E

FY2015E

1,847 (8.3) 693 (10.0) 76.6 17.6 24.1 6.6 28.7 36.8 8.9 11.6

1,923 4.1 723 4.3 73.0 18.3 23.1 6.0 26.9 34.6 8.5 11.6

2,287 18.9 788 9.0 69.7 20.0 21.2 5.4 26.4 35.6 7.1 10.2

2,551 11.5 918 16.5 70.4 23.3 18.2 4.7 27.3 37.2 6.3 9.0

Amit Patil 022-39357800 Ext: 6839 amit.patil@angelbroking.com

Please refer to important disclosures at the end of this report

SUN TV Network | 4QFY2013 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

4QFY13 473 47 10.0 44 9.4 32 6.8 124 349 73.7 102 247 52.2 2.4 22 266 266 56.3 89 33.3 178 37.6 178 39 4.5

4QFY12 427 29 6.8 38 9.0 32 7.4 99 328 76.9 107 221 51.8 0.9 15 236 236 55.2 76 32.5 159 37.2 159 39 4.0

% yoy 10.7 64.7 15.8 1.8 25.6 6.2 (4.8) 11.5 157.4 43.4 13.0 13.0 15.8 11.6 11.6 11.6

3QFY13 486 34 7.0 48 9.8 28 5.8 110 376 77.5 104 272 56.0 2 11 281 281 57.8 91 32.4 190 39.1 190 39 4.8

% qoq (2.7) 40.4 (6.6) 14.4 13.3 (7.4) (2.6) (9.2) 44.9 105.0 (5.3) (5.3) (2.6) (6.5) (6.5) (6.5)

FY2013 1,818 155 31.9 177 36.5 108 22.3 441 1,377 283.4 413 964 198.4 5 55 1,014 1,014 55.8 331 32.6 683 37.6 683 39 17.3

FY2012 1,757 101 20.7 164 33.8 92 18.9 357 1,401 288.3 443 958 197.1 6 74 1,026 1,026 58.4 332 32.3 695 39.5 695 39 17.6

% chg 3.4 54.2 8.0 17.9 23.6 (1.7) (6.7) 0.6 (13.7) (25.8) (1.2) (1.2) (0.3) (1.6) (1.6) (1.6)

May 20, 2013

SUN TV Network | 4QFY2013 Result Update

Top-line growth led by healthy 14.6% yoy growth in advertising revenue

STNL) reported a 10.7% yoy growth in its top-line to `473cr (better than our expectations), driven largely by healthy 14.6% yoy growth in its advertising revenue to `269cr (aided by low base effect). The advertising growth momentum is expected to continue with company hiking weekday prime-time ad rates by 19% for its flagship chanel, Sun TV.

Exhibit 2: Top-line trend

500 490 480 470 460 450 440 430 420 410 400 390

17.5
3.1

14.3
10.7

20.0

6.2

10.0
-

(` cr)

(7.3) (28.9)

(6.2)

(20.0)

461

454

451

427

426

433

425

486

473

(30.0) (40.0)

4Q11

1Q12

2Q12

4Q12

1Q13

2Q13

3Q12

3Q13

Top-line (LHS)

yoy growth (RHS)

Source: Company, Angel Research

Exhibit 3: Segmental revenue

350 300 250 258 269

(` cr)

200 150 100 50 Advertisement

4Q11 1Q12

56

82 38

100
17

26 37

4Q13

36

Analog Subs.
2Q12 3Q12

DTH Subs.
4Q12 1QFY13

International Subs.
2QFY13

Broadcast fees
4QFY13

3QFY13

Source: Company, Angel Research

May 20, 2013

(%)

(4.0)

(10.0)

SUN TV Network | 4QFY2013 Result Update

Robust growth in subscription revenue

STNL registered 18.0% yoy increase in subscription revenue to `138cr, mainly on account of a 16.3% yoy growth in the DTH segment to `100cr and 22.6% yoy growth in Analogue segment to `38cr (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 18.2% yoy to `26cr while broadcast fee declined 20.0% yoy to `36cr.

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

4QFY13 269 36 26 38 100 3 473

4QFY12 235 45 22 31 86 8 427

% yoy 14.6 (20.0) 18.2 22.6 16.3 (58.8) 10.7

3QFY13 293 34 26 37 95 1 486

% qoq (8.1) 5.88 2.7 5.8 135.7 (2.7)

57.0 7.6 5.5 8.0 21.2

55.0 10.5 5.2 7.3 20.1

60.3 7.0 5.4 7.6 19.4

Exhibit 5: OPM contracts 311bp yoy

90.0 80.0 70.0

Exhibit 6: PAT grows by 11.6% yoy

75.9 77.5 73.7

79.0

80.6

81.0

80.2

76.9

75.9

250 200

26.2 9.8

7.6 (12.4) (25.5) (23.7)

(15.8)

30.0 13.1
11.6 20.0 10.0

60.0

(` cr)

(%)

40.0 30.0 20.0 9.8

100

(10.0)

188

180

168

164

152

190

208

159

10.0 -

178

9.7

9.2

9.5

9.0

9.9

9.9

9.8

9.4

50

(20.0) (30.0)

1Q12

2Q12

3Q12

1Q13

2Q13

3Q13

4Q11

4Q12

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

OPM

Staff cost (% of sales)

4Q13

PAT (LHS)

yoygrowth (RHS)

Source: Company, Angel Research

Source: Company, Angel Research

4Q13

May 20, 2013

(%)

50.0

150

SUN TV Network | 4QFY2013 Result Update

Net Profit grows 11.6% yoy in spite of 311bp yoy OPM contraction
The OPM for the quarter stood at 73.7%, a decline of 311bp yoy, largely on the back of 329bp yoy increase in content cost to 10.0% of sales. Usually, content creation is outsourced to third parties. However, award nights and reality shows are produced in-house, leading to rise in content cost when expenditure is booked for such specialized shows. In spite of margin pressure, net profit grew by 11.6% yoy to `178cr.

Investment arguments
DTH to be the growth driver: The deadline for second phase of digitization across 38 cities is over. Out of 38 cities, Sun TV has strong presence in five key cities: Bangalore, Hyderabad, Mysore, Coimbatore and Visakhapatnam with 4.5mn potential digital subscribers. Sun TVs DTH revenue is expected to register a strong growth on back digitization in these cities, providing a fillip to subscription revenue which has been muted for a while. The digitization drive across the nation and consumers shifting to superiorquality 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 18.2x FY2015E consolidated EPS of `23.3. We believe the stock is fairly valued and would prefer to wait for a better entry opportunity. Hence, we recommend Neutral on Sun TV.

May 20, 2013

SUN TV Network | 4QFY2013 Result Update

Exhibit 7: Peer valuation

Company SUN TV Zee Ent.* Reco Neutral Unrated Mcap (` cr) 16,680 23,394 CMP (`) 423 245 TP (`) #

Upside (%) -

P/E (x) FY14E 21.2 27.3 FY15E 18.2 22.7

EV/Sales (x) FY14E 7.1 5.3 FY15E 6.3 4.6

RoE (%) FY14E 26.4 20.2 FY15E 27.3 20.8

CAGR # Sales 15.2 14.9 PAT 12.7 20.4

Source: Company, Angel Research, *Bloomberg estimates, CAGR over FY201315E

Exhibit 8: Angel vs Consensus estimates

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

FY2014E

FY2015E

EPS (`) Angel estimates Consensus Diff (%)

FY2014E

FY2015E

2,287 2,317 (1.3)

2,551 2,639 (3.3)

20.0 20.9 (4.3)

23.3 24.8 (6.0)

Exhibit 9: Return of Sun TV vs Sensex

200%

Exhibit 10: One-year forward P/E band

Sun TV

180%
160% 140% 120% 100%

Sensex

600 500

14x

17x

20x

23x

80%
60%

40%
20%

Jun-11

Aug-11

Jun-12

Aug-12

Apr-11

Oct-10

Oct-11

Oct-12

Feb-11

Feb-12

Dec-10

Dec-11

Dec-10

Aug-10

Aug-12

Aug-11

Dec-12

Dec-11

Source: Company, Angel Research

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.

Dec-12

Feb-12

Feb-13

Feb-11

Jun-10

Jun-11

Apr-10

Apr-11

Apr-12

Jun-12

Oct-11

Oct-12

Oct-10

Apr-13

Feb-13

Apr-13

Apr-12

0%

Share Price (`)

400
300 200

100

May 20, 2013

SUN TV Network | 4QFY2013 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
previous year numbers

FY2010 FY2011 FY2012 FY2013E FY2014E FY2015E

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) 1,923 1,923 1,923 4.1 519 184 199 6 130 1,404 73.0 427 976 3.8 50.8 5 72 6.9 7.9 1,044 2.9 1,044 331 31.7 713 (2) 723 723 4.3 37.6 18.3 18.3 4.3 2,287 2,287 2,287 18.9 693 201 217 14 262 1,593 69.7 490 1,104 13.0 48.3 6 63 5.4 8.7 1,161 11.2 1,161 383 33.0 778 (2) 788 788 9.0 34.5 20.0 20.0 9.0 2,551 2,551 2,551 11.5 754 216 230 15 293 1,797 70.4 505 1,292 17.1 50.7 6 67 5.0 9.5 1,353 16.6 1,353 447 33.0 907 (2) 918 918 16.5 36.0 23.3 23.3 16.5

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with

May 20, 2013

SUN TV Network | 4QFY2013 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
previous year numbers

FY2010 FY2011
197 88 1,689 1,973 37 0 34 2,045 1,213 228 30 1,035 437 266 332 461 574 0 2,045 197 93 2,057 2,347 32 13 41 2,432 1,307 185 1,374 603 254 517 435 939 0 2,432

FY2012 FY2013E FY2014E FY2015E

197 93 2,315 2,605 29 11 34 2,679 1,251 193 1,464 308 616 541 229 1,236 2,679 197 93 2,603 2,893 32 6 28 2,960 1,394 200 1,659 416 616 627 294 1,365 2,960 197 93 2,896 3,186 32 28 3,246 1,441 350 1,949 455 709 785 494 1,455 3,246 197 93 3,348 3,639 32 28 3,699 1,496 530 2,228 590 791 847 556 1,672 3,699

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with

May 20, 2013

SUN TV Network | 4QFY2013 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
previous year numbers

FY2010 FY2011 FY2012 FY2013E FY2014E FY2015E

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 1,044 427 (53) (59) (331) 14 1,042 (570) (155) (725) 2 (4) (265) 59 (208) 109 308 416 1,161 490 (83) (45) (383) 11 1,150 (536) (151) (687) 2 6 (466) 45 (425) 39 416 455 1,353 505 (83) (45) (447) 11 1,294 (560) (180) (740) 2 (466) 45 (419) 135 455 590

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with

May 20, 2013

SUN TV Network | 4QFY2013 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)
previous year numbers

FY2010 FY2011 FY2012 FY2013E FY2014E FY2015E

32.1 28.3 8.8 1.8 11.2 14.9 8.0 13.2 13.2 14.9 7.5 47.8 53.0 0.6 0.9 28.5 0.1 0.2 33.7 39.7 57.6 27.9 0.8 1 83 10 34 0.0 0.0 155.9 21.6 19.7 7.4 2.1 8.0 10.2 6.7 19.6 19.6 21.5 8.8 57.2 54.5 0.7 0.9 31.5 0.2 0.0 32.6 49.1 72.6 36.8 0.7 0 78 10 61 0.1 0.0 488.0 24.1 21.0 6.6 2.2 8.9 11.6 6.1 17.6 17.6 20.2 9.5 63.7 50.9 0.7 0.6 21.5 0.3 0.1 22.7 36.8 49.2 28.7 0.6 0 101 9 183 0.1 0.0 161.7 23.1 20.4 6.0 2.4 8.5 11.6 5.5 18.3 18.3 20.8 10.1 71.0 50.8 0.7 0.6 19.9 0.4 0.0 20.7 34.6 43.2 26.9 0.5 0 111 7 180 0.0 0.0 195.3 21.2 18.6 5.4 2.4 7.1 10.2 5.0 20.0 20.0 22.7 10.1 78.5 48.3 0.7 0.6 19.5 1.3 19.5 35.6 46.1 26.4 0.6 0 111 11 160 183.9 18.2 16.1 4.7 2.4 6.3 9.0 4.4 23.3 23.3 26.3 10.1 90.0 50.7 0.7 0.6 20.4 37.2 51.5 27.3 0.6 0 111 11 155 215.4

Note: Some of the figures from FY2011 onwards are reclassified; hence not comparable with

May 20, 2013

10

SUN TV Network | 4QFY2013 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%)

May 20, 2013

11