The share price of Sun TV Network rose 17% in the last four sessions on the back of expectations that the digitisation drive, which is set to kick off in Tamil Nadu, will result in subscription boost and increase in revenues for the company. On April 18, the Tamil Nadu government-owned Arasu Cable received a provisional digital licence from the ministry of information and broadcasting. The granting of provisional digital licence to Arasu is expected to kick-start digitisation in Tamil Nadu. According to analysts, this will be beneficial to Sun TV as it will get anywhere between Rs 18 and Rs 20 per subscriber from Arasu against Rs 3-4 it gets at present. Arasu has 7 million subscribers.
In a note, to investors, Credit Suisse said Sun TV gets Rs 40 per subscriber on DTH, and there will be significant upside if more subscribers shift to DTH. “Thus, there is a potential for Sun TV to double its subscription revenue from the current Rs 9.5 billion over the next few years as digitisation progresses in Tamil Nadu,” the note said. “We reckon Sun’s subscription income can now easily witness a 25% CAGR (15% earlier) and thus increase from Rs 9.5 billion in FY17 to Rs 14 billion in FY19,” the note added.
Analysts further said the reduction in licence fee for IPL after FY19 will help Hyderabad Sunrisers, the team owned by Sun TV to break even. Moreover, the TV rights of IPL will be up for sale this year and that is likely to fetch a higher income for franchisees. AK Prabhakar, head of research at IDBI Capital, said the superior margin and cheaper valuations Sun TV commands over its peers make it an attractive stock. Sun
TV has a price to earnings (PE) ratio of 41.23 whereas its listed peer Zee has a PE of 57.64. A total of 53.87 lakh shares were traded on the two main exchanges – BSE and NSE – and the volume was 2.3 times higher than average daily volumes in six months. Of the 24 analysts who track the stock, 17 have given it a ‘buy’ rating, while six have given it a ‘hold’ rating. One analyst gave ‘sell’ rating.