Q4FY21 income/EBITDA at Rs 7.8/ 5.5 bn have been largely according to our estimates (Rs 8/5.4 bn) however above consensus (Rs 7.7/5.2 bn). Commercial income rose ~7% y-o-y (-11% vs Q4FY19), weaker than peer Zee (~9% y-o-y, -8% vs Q4FY19). Subscriptions rose ~7% y-o-y. However, DPS of solely Rs 5 (~13% payout) in FY21 vs Rs 25 (72% payout) in FY20 and no buy-back announcement have been key disappointments.
Commentary: Solar’s prime time market share in its flagship channel, SunTV, improved to 42% in April from ~37% in FY21. Going forward, it plans high-cost non-fiction reveals in Telugu/Malayalam and regain share. It targets to develop subscription income in double-digits in FY22F led by ongoing digitisation. On film manufacturing, it plans to spend ~Rs 10 bn over the subsequent two years.
Our view: Whereas Solar’s Tamil viewership share has remained secure, it has misplaced share within the Telugu and Malayalam genres. We consider the structural progress restoration of Solar is contingent on: (i) sustained market share features in current genres (Tamil, Telugu and many others); (ii) success in new genres like Marathi, Bengali; and (iii) growing deal with OTT content material (up to now, Solar’s focus has been restricted in contrast with friends) and danger of potential shift in promoting/subscription traits in the direction of digital platforms.
We marginally revise estimates – advert income progress of 27%/10% in FY22/23F (+29%/8% earlier), subscription income progress of seven%/8% (6%/5% earlier), resulting in a -2%/-1% change in income estimates for FY22/23F. We consider 65.8%/62.2% Ebitda margins (63.7%/61.6% earlier), resulting in largely unchanged EPS estimates.
Valuation: Trim TP to Rs 601
Present valuation at ~13.3x FY23F EPS isn’t costly, contemplating Solar has internet money of Rs 41 bn or ~Rs 102 per share, ~20% of market cap and ~8%/7% FCF yield on FY22/23F. Nonetheless, re-rating catalysts will rely on bettering progress visibility. We keep our goal PE at 15x on FY23F EPS to reach at our TP of Rs 601 (Rs 602 earlier). Keep Impartial. Considerably larger worth of IPL staff in long run is a possible upside. Additional market share loss in Tamil style is a draw back danger.