Advertising recovery, near-term gains from IPL to support Sun TV stock


The pick up in spends led by fast moving consumer goods companies, expectations of revival in regional advertising, near term gains from IPL and regional elections are positive for the Sun TV Network stock.

The near term trigger would be a 10-15 per cent y-o-y growth in advertising revenues for the sector in the March quarter which should help the company. Sun TV had reported a 10 per cent decline in ad revenues in the December quarter due to slower recovery in retail, lower number of movies and muted market share in the Tamil Nadu market.

The gains in the March quarter, according to analysts at Nomura, would be led by strong spends by the FMCG segment, e-commerce and banking. The upcoming Indian Premier League season this month is also likely to further benefit the advertising industry’s recovery going ahead, they add. Election related spends pegged at Rs 15-40 crore in Tamil Nadu and Kerala too could help boost advertising revenue growth for Sun TV which has the highest share in the southern markets. Growth will also be dependent on spends by regional advertisers and the ability of the company to launch new shows and gain market share.

After a 3 per cent growth in the December quarter, analysts expect the subscription segment to post a 10-12 per cent revenue growth led by ongoing digitisation and shift to direct to home or DTH from the cable segment. While the company is confident of double digit growth in the segment, the street will keep an eye out for clarity on New Tariff Order 2.0 as well as traction for SunNXT, the online video streaming platform of the company. The company has invested in creating original content with an initial focus in Telugu and Tamil and its ability to monetise this medium will be watched out for.

In addition to the improvement in the two key segments and growth prospects, analysts at HDFC Securities are positive on the stock due to healthy cash balance and robust dividend payout. At the current price the stock is trading at 11 times its FY22 earnings estimates. While the prospects are improving, investors should await March quarter numbers and digital traction before considering the stock.

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