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    Media stocks: Why this brokerage prefers Sun TV over Zee?

    Synopsis

    On Zee, the brokerage has given a buy call for a target price of Rs 370, which signals a 32% potential upside. For Sun TV also the brokerage has given a buy call with a target of Rs 760, over 44% upside potential.

    iStock-171588907Agencies
    Considering the positive outlook with cheap valuations for media stocks, domestic brokerage house JM Financial has initiated coverage on Zee Entertainment and Sun TV.

    On Zee, the brokerage has given a buy call for a target price of Rs 370, which signals a 32% potential upside. For Sun TV also the brokerage has given a buy call with a target of Rs 760, over 44% upside potential.

    Sun TV, a leading broadcast network in South India, is among the most profitable media companies globally. The company’s superior margins are drawn from investment in the right content, lower content cost and better monetisation, the brokerage noted.

    “Its core broadcasting business (ex-IPL, ex-cash) trades at a 5x FY24E PER. Concerns around lower growth, inadequate investments in OTT, and inconsistent pay-out are some of the reasons attributed to low multiples,” said the brokerage.

    Nevertheless, the brokerage is of the view that most of these concerns are unfounded and do not warrant such a steep discount. “Moreover, Sun TV’s IPL franchise is under-appreciated by the market. The stock is trading at less than 1-SD below its long-term average PER and EV/EBITDA multiples, unjustified in our view,” said the brokerage in its report.

    On the other hand, the brokerage sees Zee on course correction as investments in the media major have resumed and viewership has almost stabilized. Also, JM Financials maintains that a merger with Sony should put Zee back on the growth path while allaying governance concerns. “At 17x FY24E merge-co EPS, negatives are priced in,” the brokerage added. Nevertheless, the key risk to the coverage remains any instance of merger failure.

    While the brokerage is bullish on both the media counters, it prefers Sun TV over Zee on the back of the former’s market leadership and availability at a steep discount.

    (Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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