Sun TV's Q1 profit below expectations

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Sun TV’s Q1 FY12 revenues grew 3 per cent to Rs 4,540 million, which was 7 per cent below expectations, due to lower-than-expected ad growth of 4 per cent. The earnings per share (EPS) is expected to be Rs 21.4 in FY12 and Rs 24.5 in FY13, a growth of 18 per cent CAGR from the FY10 levels.

Ad revenues grew 4%; new channels to boost ad inventory
Sun TV’s Q1 FY12 revenues grew 3 per cent to Rs 4,540 million against Rs 4,404 million in Q1 FY11. DTH and international subscription revenues grew 25 per cent each, in line with expectations. Analogue cable business grew 10 per cent, however movie business was down 54 per cent YoY.
Advertising revenues grew 4 per cent, from the highs of over 25 per cent in FY11, due to higher base effect and slowdown seen particularly in the non-GEC channels. During the festive season, advertising revenues will bounce back.
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The network also plans to launch 5-6 new channels in September-October, which will help boost its ad inventory. It has a license to launch 12 channels.
The company released two movies in Q1 and will release one at the end of Q2. The management has reduced its FY12 advertising growth outlook from 15-18 per cent to 12-15 per cent.

Operating profit margin firm at 80.6%
Operating profit margin was at 80.6 per cent, down 110bps YoY. Operating profit was up 2 per cent at Rs 3,659 million, while profit after tax was Rs 1876 million, up 10 per cent YoY.

Maintaining its leadership position in the Southern broadcast markets
The company continues to lead Tamil, Telugu and Kanada GEC markets with an average market share of 70 per cent, 43 per cent and 42 per cent, respectively. Going ahead, the company is looking at exploiting the growth potential in the regional non-GEC channels with the launch of 5-6 new channels. It plans to produce 6-8 movies in FY12. Its capex for FY12 is Rs 1,500 million mainly for acquiring satellite rights of new movies and is sitting on cash of Rs 8 billion.

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