Shares of Sun TV Network tumbled 12 per cent to Rs 467 on the BSE on Wednesday after higher operational expenses dragged the company's consolidated profit before tax (PBT) 26 per cent lower at Rs 400 crore, in September quarter (Q2FY20) on YoY basis.
In the quarter under review, the company’s operational revenue went up 6 per cent at Rs 826 crore, while total expenses jumped 66 per cent to Rs 500 crore over the corresponding quarter of the previous year. Additionally, the company’s advertisement revenue came in at Rs 337 crore, down 1.5 per cent YoY, impacted by a weak economic environment.
EBITDA (earnings before interest, tax, depreciation and amortisation) declined 15 per cent at Rs 469 crore on YoY basis. Consolidated net profit, too, remained flat YoY at Rs 369 due to lower tax provisioning.
A challenging economic environment, increased costs (including some one-offs) weighed on the company's topline and EBITDA, believe analysts at ICICI Securities. "The lower EBITDA on account of certain one-offs related to CSR and bad debt provisioning and continued higher content spending," they said.
"While weak macroeconomic growth clouds the ad growth outlook in the near term, content spend is expected to remain elevated, in both -- key markets and SunNXT -- to maintain/regain market share. The silver lining, on the other hand, is TN digitisation potential and much needed focus on OTT segment," the brokerage firm said in a results review note, adding, "However, we would turn constructive when we witness ad recovery and stabilisation in costs". The brokerage firm has a ‘hold’ rating on the stock and target price of Rs 500 per share.
Sun TV Network is one of the largest television broadcasters in India, operating satellite television channels across four languages of Tamil, Telugu, Kannada and Malayalam. It airs FM radio stations across India and owns the Sun Risers Hyderabad cricket franchise of the Indian Premier League.