2QFY2013 Result Update | Media

November 15, 2012

SUN TV Network
Performance Highlights
Quarterly data (Standalone)
(` cr) Revenue EBITDA OPM (%) PAT 2QFY13 433 329 75.9 152 2QFY12 451 365 81.0 180 % yoy (4.0) (10.0) (506)bp (15.8) 1QFY13 426 323 75.9 164 %qoq 1.8 1.9 7bp (7.7)

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 14,554 (490) 0.7 374/177 142,228 5 18,471 5,631 SUNTV.BO SUNTV.IN

`369 -

Source: Company, Angel Research

For 2QFY2013, Sun TV Network Ltd (STNL) reported a 15.8% yoy decline in net profit to `152cr. The companys OPM contracted by 506bp yoy to 75.9% largely on the back of 281bp yoy increase in cost of revenues as a percentage of sales (due to a non-fictional show produced during the quarter) and shift from Insat to Intelsat satellite. Loss of cable revenues from TN dented top-line: For 2QFY2013, Sun TV posted a 4.0% yoy decline in its top-line to `433cr on account of loss of cable revenues from Tamil Nadu (TN) and subdued 4% yoy growth in advertising revenues. However, on a positive note, the management expects double digit advertising growth in Q3FY2013 aided by festive season and has also tied up with Arasu Cable TV which should ensure increase in subscription revenue in subsequent quarters. In other segments, DTH grew by 13.9% yoy to `90cr while international revenue grew by 50% yoy to `27cr. Outlook and valuation: Sun TV is expected to benefit from mandatory digitization and signing of Arasu deal which would ensure steady cable revenues from Tamil Nadu. At the current market price, STNL is trading at 19.4x FY2014E consolidated EPS of `19.1. 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 14.4 6.5

Abs. (%) Sensex SUNTV

3m 4.2 19.6

1yr 9.4 35.3

3yr 9.6 18.6

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 18.9 6.5 36.8 49.1 6.9 8.8

1,847 (8.3) 693 (10.0) 76.6 17.6 21.0 5.8 28.7 36.8 7.7 10.1

1,942 5.1 692 (0.2) 77.2 17.6 21.0 5.2 25.8 35.6 7.2 9.3

2,237 15.2 751 8.5 75.5 19.1 19.4 4.7 25.2 36.5 6.2 8.2
Amit Patil 022-39357800 Ext: 6839 amit.patil@angelbroking.com

Please refer to important disclosures at the end of this report

SUN TV Network | 2QFY2013 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

2QFY13 433 34 7.8 43 9.9 28 6.4 104 329 75.9 114 215 49.7 0.5 10 224 224 51.8 73 32.4 152 35.0 152 39 3.8

2QFY12 451 23 5.0 41 9.2 22 4.9 86 365 81.0 118 248 54.9 0.8 19 266 266 58.9 86 32.2 180 39.9 180 39 4.6

% yoy (4.0) 50.1 3.6 26.2 21.6 (10.0) (3.2) (13.2) (34.2) (48.4) (15.6) (15.6) (15.1) (15.8) (15.8) (15.8)

1QFY13 426 40 9.4 42 9.9 21 4.8 103 323 75.9 93 230 54.0 0 13 243 243 57.0 78 32.3 164 38.6 164 39 4.2

% qoq 1.8 (15.8) 1.7 34.9 1.5 1.9 22.1 (6.3) 150.0 (27.4) (7.6) (7.6) (7.4) (7.7) (7.7) (7.7)

1HFY2013 859 74 17.4 85 20.0 48 11.3 207 652 75.9 207 445 51.8 1 23 467 467 54.4 151 32.3 316 36.8 316 39 8.0

1HFY2012 905 47 11.0 85 20.1 42 9.8 174 731 80.8 224 508 56.1 1 36 543 543 59.9 175 32.2 368 40.6 368 39 9.3

% chg (5.1) 58.2 (0.4) 15.3 19.1 (10.9) (7.4) (12.4) (29.3) (36.4) (13.9) (13.9) (13.6) (14.1) (14.1) (14.1)

November 15, 2012

SUN TV Network | 2QFY2013 Result Update

Top-line de-grows due to decline in analogue revenues

During 2QFY2013, STNLs top-line declined by 4.0% yoy to `433cr. The decline in top-line was mainly on account of a sharp decline of 31.1% yoy in analogue revenue to `32cr (due to omission of Sun TV channel bouquet from Arasu Cable TV) and subdued 4% yoy growth in advertising revenues. However, on a positive note, the management expects double digit advertising growth in Q3FY2013 aided by festive season and has also tied up with Arasu Cable TV which should ensure increase in subscription revenue in subsequent quarters. In other segments, DTH grew by 13.9% yoy to `90cr while international revenue grew by 50% yoy to `27cr.

Exhibit 2: Top-line declines 4.0% yoy

700 600 500 (` cr) 400 300 200 440 425 598 461 454 100 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 53 33 18 6 3 451 425 427 (7) (6) (4) 60 51 50 40 30 20 10 (10) 426 (29) 433 (20) (30) (40) (%)

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

yoy growth (RHS)

Exhibit 3: Segmental revenue

300 250 200 (` cr) 150 100 54 50 Advertisement
2Q11 3Q11

230

245

70 32

90 27 40 37

16 DTH Subs.
2Q12 3Q12

Analog Subs.
4Q11 1Q12

International Subs.
4Q12

Broadcast fees
2QFY13

1QFY13

Source: Company, Angel Research

November 15, 2012

SUN TV Network | 2QFY2013 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

2QFY13 245 37 27 32 90 3 433 56.4 8.5 6.2 7.5 20.8 0.6

2QFY12 235 39 18 47 79 33 451 52.1 8.6 4.0 10.4 17.5 7.3

% yoy 4.0 (5.1) 50.0 (31.1) 13.9 (92.4) (3.9) -

1QFY13 243 37 26 30 89 2 427.0 56.9 8.7 6.1 7.0 20.8 0.5

% qoq 0.6 3.8 8.0 1.1 25.0 1.5 -

Net Profit declines 15.8% yoy led by 506bp yoy OPM contraction
The OPM for the quarter stood at 75.9%, a decline of 506bp yoy, largely on the back of 281bp yoy increase in cost of revenues as a percentage of sales (due to a non-fictional show produced during the quarter) and shift from Insat to Intelsat satellite. Staff costs as a percentage of sales also inched up by 72bp yoy to 9.9%. Staff costs stood at `43cr for the quarter. A decline in the top-line coupled with margin contraction led to a 15.8% yoy decline in net profit to `152cr in 2QFY2013.

Exhibit 5: OPM contracts 506bp yoy

90.0 80.0 70.0 60.0 (%) 50.0 40.0 30.0 20.0 10.0 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 OPM Staff cost (% of sales) 9.6 8.0 9.8 9.7 9.2 9.5 9.0 9.9 9.9 78.2 83.9 79.0 80.6 81.0 80.2 76.9 75.9 75.9

Exhibit 6: PAT declines by 15.8% yoy

(` cr) 250 200 150 100 167 225 208 188 180 50 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13
PAT (LHS) yoygrowth (RHS)

48.4 28.2 26.2 7.6 (23.7) (12.4) (15.8)

(%) 60.0 50.0 40.0 30.0 20.0 (25.5) 168 159 164 152 10.0 (10.0) (20.0) (30.0) 9.8

Source: Company, Angel Research

Source: Company, Angel Research

IPL team acquired

During 2QFY2013, Sun TV acquired the Hyderabad IPL team for `85.5cr/year. The management has guided a loss of ~`30cr in FY2014. However, the management expects to achieve EBITDA breakeven by FY2016.

November 15, 2012

SUN TV Network | 2QFY2013 Result Update

Investment arguments
DTH to be the growth driver: The first phase of digitization in the four metros Delhi, Mumbai, Chennai, and Kolkata has started. The company expects robust subscription revenue from Chennai post digitalization. The digitization drive across the nation and consumers shifting to superior-quality DTH from cable television would benefit STNL, as it is a well known player in South India. Arasu deal to boost analog revenues: Sun TV has signed an agreement with Arasu Cable TV which will enable total availability of STNLs channels on all cable TV distribution systems run by Arasu Cable TV across the state of Tamil Nadu. This deal has strengthened the reach of Sun TV network across Tamil Nadu and ensures increase in cable revenues in subsequent quarters.

Outlook and valuation

Sun TV is expected to benefit from mandatory digitization and signing of Arasu deal which would ensure steady cable revenues from Tamil Nadu. At the current market price, STNL is trading at 19.4x FY2014E consolidated EPS of `19.1. We believe the stock is fairly valued and would prefer to wait for a better entry opportunity. Hence, we recommend Neutral on Sun TV.

November 15, 2012

SUN TV Network | 2QFY20 Result U k 013 Update

Exhibit 7: Peer valuation t

Compa any SUN T TV Zee En nt.* Reco o Neutr ral Unrated Mcap (` cr) 14,554 18,969 CMP (`) 369 198 TP T (` `) #

Upside (%) -

P/E (x) FY13E 21.0 27.5 FY Y14E 19.4 23.0

EV/Sales (x) FY13E E 7.2 2 5.0 0 FY14E 6.2 4.4

RoE (%) FY13E 25.8 18.4 FY1 14E 25.2 19.5

CAGR # Sales 10.1 15.8 PAT 4.1 17.6

Source: Company, Ange Research, *Blo el oomberg estima ates, CAGR ove FY201214E er

Exhibit 8: Angel v Consensu estimates t vs us

Top lin (` cr) ne Angel estimates Consensus Diff (% %)
Source: Company, Ange Research el

FY2013E 1,942 1,957 (0.8)

FY2014 4E 2,23 37 2,24 42 (0.2 2)

EPS (`) E Angel estimates A s Consensus C Diff (%) D

FY201 13E 17 7.6 18 8.3 (4 4.1)

FY2 2014E 19.1 20.9 (8.8)

Exhibit 9: Return o Sun TV vs Sensex t of s

140% 120% Sensex SUN T TV

Exhib 10: Onebit -year forward P/E band d

60 00 50 00
Share Price (`) 10x 13x 16x 19x

100% 80% 60% 40% 20% 0% Oct-10 Feb-11 Oct-11 Feb-12 Aug-12 Aug-10 Aug-11 Dec-10 Dec-11 Oct-12 Apr-11 Apr-12 Apr-10 p 0 Jun 11 Jun-11 Jun-10 Jun-12

40 00 30 00 20 00 10 00 0 Apr-11 Oct-10 Oct-11 Apr-12 Dec-10 Aug-11 Dec-11 Aug-12 A g 12 Feb 11 Feb-11 Feb-12 Feb 12 Oct-12 Jun-11 Jun-12

Source: Company, Ange Research el

Source Company, An e: ngel Research

Compan backgro ny ound

STNL is a l leading broad dcaster in the South India states of Tamil Nadu, A e an T Andhra Pradesh, K Karnataka and Kerala. The company is promoted by Kalanithi M d e s b Maran. The group is present across the media value chai viz broadc in, casting, radio films, o, ribution, DTH and print media. STNL has the la H argest broadcasting cable distr network in South India, with 20 ch hannels in the GEC, kids, movies and news d space. Besi ides TV broad dcasting, STN owns FM r NL radio licenses for 45 cities STNL s s. has a stron movie libra comprising more than 8,500 titles, with rights across all ng ary g w the four m major south In ndian langua ages. Apart f from having an extensive movie library, STN purchases around 90% of all movie r NL releases in the language ese es.

Novem mber 15, 2012

SUN TV Network | 2QFY2013 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 5.1 442 145 188 8 100 1,500 77.2 499 1,001 6.3 51.5 5 47 4.5 7.0 1,043 2.8 1,043 360 34.5 683 (2) 692 692 (0.2) 35.6 17.6 17.6 (0.2) 2,237 2,237 2,237 15.2 548 221 201 11 114 1,690 75.5 561 1,129 12.8 50.5 4 45 3.8 7.0 1,170 12.2 1,170 428 36.6 742 (2) 751 751 8.5 33.6 19.1 19.1 8.5

November 15, 2012

SUN TV Network | 2QFY2013 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 1,838 1,213 228 30 1,035 437 266 332 461 574 2,045 1,307 185 1,374 603 254 517 435 939 2,432 1,251 193 1,464 308 616 541 229 1,236 2,679 1,198 263 1,880 653 602 625 407 1,474 2,934 1,268 383 2,108 703 694 712 499 1,609 3,259 197 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 2,581 2,871 29 34 2,934 197 93 2,905 3,196 29 34 3,259 FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E

Note: FY12 balance sheet numbers as per revised schedule VI

November 15, 2012

SUN TV Network | 2QFY2013 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 1,043 499 (57) (36) (360) 10 1,100 (447) (70) (517) 2 (11) (265) 36 (237) 346 308 653 1,170 561 (89) (37) (428) 11 1,186 (630) (120) (750) 2 (426) 37 (387) 49 653 703

November 15, 2012

SUN TV Network | 2QFY2013 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 0.0 161.7 202.5 282.3 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 8 154 0.6 0 111 9 148 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 47.7 25.8 36.5 53.9 25.2 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 51.5 0.7 0.6 19.6 0.6 0.0 20.2 50.5 0.6 0.6 19.2 19.2 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 17.6 17.6 20.4 9.3 70.5 19.1 19.1 22.3 9.3 78.7 39.5 35.7 8.6 0.7 13.4 18.9 7.6 28.0 24.7 7.7 2.0 9.6 12.7 6.8 18.9 17.2 6.5 2.4 6.9 8.8 5.7 21.0 18.3 5.8 2.6 7.7 10.1 5.2 21.0 18.1 5.2 2.5 7.2 9.3 4.7 19.4 16.6 4.7 2.5 6.2 8.2 4.3

FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E

November 15, 2012

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SUN TV Network | 2QFY2013 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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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%)

November 15, 2012

11