Outlook and Valuation
Sun has been posting strong set of numbers since last two quarters. On the advertising business, despite loss of market shares across board, inventory utilization, improvement in yields and low base led to robust growth. Subscription revenues are on an up-move on TN digitization wave. Going forward, these two businesses along with their levers are believed to provide impetus to the financials of Sun. Additionally, IPL turnaround with higher revenues and lower costs will aid margin performance. Higher ARPUs at subscription business with Arasu issue settling will lead to mammoth incremental revenues and profitability. In order to tackle competition from Zee and Star, entry into new geographies, launch of new Tamil GEC, differentiated content and higher emphasis on commission based model may lead to better market share revival and topline growth. Though these may lead to higher content costs, operating leverage may lead to higher margins. We remain sanguine on the company and expect strong double digit growth in bottomline in FY19-20E. We maintain BUY rating on the stock.