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%
Valuation
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.