Can Sun TV rise further after Q1 performance? Here's what brokerages say

New Delhi: The majority of the brokerage firms remained positive on Sun TV after the company reported a strong performance in the June 2022 quarter. Analysts see an up to 42 per cent upside in the stock.

The south-based broadcaster reported a 35.32 per cent rise in consolidated profit after tax to Rs 493.99 crore in the first quarter ended June. The company had reported a profit after tax of Rs 365.03 crore in the April-June period a year ago.

Sun TV's revenue from operations rose 48.88 per cent to Rs 1,219.14 crore in the latest June quarter. It was at Rs 818.87 crore in the year-ago period. Sun TV's board also approved an interim dividend of 100 per cent, which is Rs 5 per share.

Sun TV operates satellite television channels across Tamil, Telugu, Kannada, Malayalam, Bangla and Marathi. It has FM radio stations and owns the SunRisers Hyderabad Franchise of the Indian Premier League as well as the OTT platform Sun NXT.

Sun TV’s ramp-up in viewership in key markets, increasing presence, and increasing foothold in other regional languages, such as Marathi, are positive, said Edelweiss. Strong flows from IPL monetisation and potential from other franchises are accretive.

Sun TV is expected to witness continued growth from advertising as big spenders like FMCG ramp up spending, it added with a buy tag and Rs 642 as a target price. While increasing competition and OTT aggression are key monitorables, it said.

"We pare down our revenue estimates for FY 23-24 after factoring in slightly lower ad growth. The core broadcasting business is trading at a low valuation of 6.5 times," said Elara Capital with a target price of Rs 642, indicating a 35 per cent upside.

The digital business also remains a lag with no fresh investments on OTT originals and the movie catalogue is large, but a sizable original catalogue is needed to scale up digital business in the highly fragmented India market, it added.

However, ICICIDirect Research, which has a hold rating with a target price of Rs 515 on the stock, said that pushing back of OTT content spending remains a key concern while film content spending will create volatility in earnings.

"We also do not have management outlook/commentary on content strategy, margins, growth outlook and capital allocation ahead, which restricts us from turning constructive, despite lucrative valuations," it added.

Overall viewership share improvement, which has dipped in recent times. Recovery in key markets like Tamil/Telugu/Kannada to be ad growth driver, the brokerage said. "Marked ramp up in SunNXT content, where content spending is lagging"

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