Sun TV Valuation Excel Model and Intrinsic Value of Shares- BDV

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Sun TV Valuation : About the Company

Sun TV is an Indian Tamil Language cable and satellite television channel launched in 1993. It is the flagship channel of the Chennai-based media conglomerate Sun Group’s Sun TV Network and has been one of the widest-reaching entertainment channels in South India. The major operating Channels and regional and includes Tamil, Telegu, Kannada, Malayalam and Bengali languages.

The business model of the company is such that the company currently owns and operates 32 TV channels (24 SD + 8 HD) across Indian languages – Tamil, Telugu, Kannada, Malayalam and Bengali. They will also be launching 7 new HD channels and 3 new SD channels including network’s first channel in the Marathi language. This will mark the entry of the company into North Indian market after Sun Bangla. After this, Sun Group will have a total of 42+ channels in their bouquet.

The company also owns two daily newspapers and five magazines in Tamil language and it is the second-largest circulated Tamil daily in India after Dina Thanthi. The management is also looking forward to the new way of entertainment with Sun NXT. It is a global online audio/video streaming platform owned and operated by Sun TV Network and has more than 4000 movie titles. From here, we go ahead with Sun TV Valuation and Intrinsic Value of its shares.

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Read more here: Sun TV Shares Fundamental Analysis 

Methodology Used:

Discounted cash flow (DCF) is a valuation method used to estimate the value of an investment based on its expected future cash flows. DCF analysis attempts to figure out the value of an investment today, based on projections of how much money it will generate in the future. The following step by step procedure is followed.

  1. Determining the Revenue Growth Rates
  2. Forecasting the Financial Statements
  3. Deriving the FCFF and FCFE
  4. Calculating the Terminal Value
  5. Calculating the Discount Rate
  6. Discounting the Cashflows
  7. Arriving at the Intrinsic Value of the Shares

You can also get the formula based DCF Excel Model from below:

Step 1: Determining the Revenue Growth Rates

We arrive at the below table by using the past and expected future performance of both the company and the economy. This along with adjustments to changes in the management expectations, extraordinary events and other macro factors give the revenue growth rates for Sun TV Valuation.

Financial Year Revenue Growth Rate
Year 1 5%
Year 2 -8%
Year 3 21%
Year 4 15%
Year 5 8%
Revenue Growth Rates: Sun TV Valuation

Step 2: Forecasting the Financial Statements

The financial statements are forecasted for a period of 5 years using the annual report data of the company. The assumptions used for forecasting are tabulated below. The Excel model is completely editable and can be adjusted for specific changes which may happen over a period of time.

Financial Statements Forecast : Sun TV Valuation

Step 3: Deriving the FCFF and FCFE

Free cash flow to the firm (FCFF) represents the amount of cash flow from operations available for distribution after accounting for depreciation expenses, taxes, working capital, and investments. FCFF is a measurement of a company’s profitability after all expenses and reinvestments. It is given as follows.

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Free cash flow to equity (FCFE) is a measure of how much cash is available to the equity shareholders of a company after all expenses, reinvestment, and debt are paid. FCFE is a measure of equity capital usage.

F/S Items (INR Millions) Mar-20 Mar-21 Mar-22 Mar-23 Mar-24
Free Cash Flow to Firm 19145 20246 21297 25480 28202
Free Cash Flow to Equity 7030 7162 20482 21211 19188
FCFF and FCFE values: Sun TV Valuation

Step 4: Calculating the Terminal Value

Terminal value (TV) is the value of a business or project beyond the forecast period when future cash flows can be estimated. It assumes that a business will grow at a set growth rate forever after the forecast period. Terminal value often comprises a large percentage of the total assessed value.

Terminal Value Calculation Units INR Millions
Free Cash Flow to Firm 28202.41
Growth Rate 5.00%
Cost of Capital 13.64%
Terminal Value 342931.64
Terminal Value: Sun TV Valuation

Step 5: Calculating the Discount Rate

DCF analysis helps assess the viability of a project or investment by calculating the present value of expected future cash flows using a discount rate. Here we use the Weighted average cost of capital (WACC) to discount the cash flow. The below table from the excel model shows the calculation of WACC for Sun TV Valuation.

WACC Calculation for Sun TV Valuation.

Step 6: Discounting the Cashflows

The WACC and the Cost of Equity for the company calculated in the above step are then used to discount the FCFF, FCFE and Terminal Value calculated in Step 3 and 4. In our case, we’ll only consider the FCFF based Intrinsic price of the shares as it represents the cash flow to all the suppliers of capital and not only to the equity shareholders. Thus we arrive at Present value of future FCFF for Sun TV Valuation. (Units are INR Millions)

PV of FCFF and FCFE for Sun TV Valuation.

Step 7: Arriving at the Intrinsic Value of the Shares

Dividing the PV of the FCFE and Terminal Value (the Value of the entire firm) by the number of outstanding shares we get the per share intrinsic value. We can compare this price with the current market price of the stock to get the Discount or Premium to its intrinsic price.

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Sun TV Valuation Units
PV in INR Million 229526
No of Shares Outstanding (In Million) 394
Intrinsic Value 582.55
Current Market Price of Share 531.00
Current Discount/Premium -9%
Intrinsic Value of the Shares: Sun TV Valuation

Sun TV Valuation and Intrinsic Share Price = INR 582.55

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References: Investopedia
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You can read more about the company on its website!
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(Note: All the research done by me is only for educational purposes and should not be seen as Investment recommendations. I am a Research analyst and not a SEBI registered Investment Advisor. My research completely reflects my personal opinions and not of my employers. Kindly do your own due diligence before Investing)

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