As with Avanti Feeds, I picked Sun TV from the screen of low debt, high growth companies with low P/E ratio. I also picked it in-part due to my affinity towards Sunrisers Hyderabad who they own.
Numbers and Narratives
Sun TV is a mature company in a growing industry. I expect it to coninue its above-average growth and high margin owing to the industry it operates in.
The core numbers that I arrive at based on the story are
- Compounded revenue growth for next 5 years = 18% (COVID adjusted, 12% historical industry average)
- EBIT margin in year 10 = 25% (50% most recent year)
- Initial cost of capital = 9.76%
I’ve used the above numbers along with the financial information to compute my DCF valuation for Sun TV as seen below.
As you can see, the valuation price came out to ₹518.21, about 8% higher than the last traded price of ₹478.45.