Why analysts are bullish on Sun TV stocks

By: | Published: August 8, 2015 1:17 PM

Brokers are bullish on the company and believe the share price of the company can touch Rs 485 in the next few quarters.

sun tv profitBrokers are bullish on the company and believe the share price of the company can touch Rs 485 in the next few quarters.

Shares of Sun TV Network zoomed over 35 per cent to Rs 348.55 in the past 11 trading sessions till August 6. Brokers are bullish on the company and believe the share price of the company can touch Rs 485 in the next few quarters.

Earlier, Sun TV Network was in limelight as the home ministry has struck down I&B ministry’s proposal of giving security clearance to 33 TV channels of the company. As a result, the share price of the company plunged around 40 per cent in the first quarter of the ongoing financial year. The share price of the company tanked to Rs 282.05 on June 30 from Rs 453.85 on April 1.

Centrum Broking has tweaked earnings forecast for Sun TV Network lower by 2 per cent and 0.6 per cent for 2015-16 and 2016-17, respectively, factoring lower IPL revenues and increasing losses. The brokerage firm said that the share price of the company could touch Rs 485 in near future.

According to JM Financial, management of Sun TV is also confident about achieving double digit growth in both advertisement and subscription revenues for the full year, and guided down the movie amortisation cost for 2015-16 to Rs 450-500 crore from Rs 500-550 crore previously. Further management assuaged concerns on licence or security issues, and said it is open to divesting or exiting the IPL cricket franchise.

Sun TV Network Ltd (Sun) posted a decent performance in Q4 as all the segments of the company put up a good show. Advertising revenues grew by a steady 7.8 per cent year-on-year (yoy) and 4 per cent quarter on quarter (qoq) as the company relied more on higher ad inventory utilisation and has plans to continue with it. DTH revenues showed a strong traction by growing 15.4 per cent yoy and 2 per cent qoq despite DAS implementation getting delayed as subscribers as well as realisations improved.

For the quarter ended June 2015, the company registered revenue of Rs 671.09 crore, up 9.08 per cent, against Rs 633.58 crore in the corresponding quarter a year ago. Through IPL(the company owns Sun Risers Hyderabad franchise) the company posted revenues of Rs 96.5 crore with operating loss of Rs 56.6crore. Ex-IPL operating performance was even better.

Net profit of the company increased 19.1 per cent on year-on-year basis to Rs 197.28 crore on strong operating performance. The company earned Rs 165.64 crore in the corresponding quarter a year ago.

Price to earnings ratio of the company may fall from 17 in 2014-15 to 15 and 12.5 in 2015-16 and 2016-17, respectively, according to Centrum Broking. However, return on equity may jump from 24.3 per cent in 2014-15 to 28.4 per cent in 2016-17.

Sun TV would be the biggest beneficiary of the Phase-III/IV digitisation from South India leading to significant margin expansion while steady ad growth would further help.

A research report by LKP Securities said, “The share price of the company can touch Rs 429.”

Key risk could be TRAI regulation on ad inventory cap, loss of market share in Kannda/Telugu markets.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition