Sun TV: Partly cloudy skies

With the radio business continuing to post higher than expected losses, the consolidated set of numbers from Sun TV haven’t quite come in as anticipated.

Also the growth in advertising revenues in the March 2009 quarter, at just 7per cent, isn’t encouraging and it’s lower spends overheads and only marginally higher expenses on employees that have helped the leading broadcaster in the South to post an increase in the earnings before interest and tax (ebit) of 32 per cent.

The increase in the advertising revenues is way below the growth seen in the first three quarters of 2008-09. Sun TV is the market leader in three of the four southern markets but industry watchers suspect the broadcaster could be losing market share in Andhra Pradesh, Karnataka and perhaps in Kerala where it is the number two player after Asianet. However, Sun remains a strong player in the lucrative Tamil Nadu market.

Advertising revenues should grow at a moderate 12-15 per cent in the current year but revenues from DTH will be strong and could double from last year’s levels of Rs 84 crore. Also, the management has indicated that losses from the radio business will reduce this year to around Rs 45 crore from Rs 70 crore last year.

While earnings are expected to grow at a somewhat subdued 20 per cent this year, the current price of Rs 235 discounts the stock by just over 21 times consolidated 2009-10 earnings. That is expensive in the current environment with the outlook on advertising revenues not too bright.