Analysts peg a 16 per cent increase in subscription revenue if about half of the Arasu subscribers shift to DTH or other operators. Credit Suisse, which upgraded its rating for Sun, expects the company’s subscription revenue to double over the next three to four years. So, it has increased its target price for the stock (its estimate of where the scrip would reach) to Rs 1,000, from Rs 790 earlier. CLSA, too has upgraded the stock on digitisation rollout and due to falling risks on account of legal and political issues of the company’s promoters. A Delhi court had acquitted all the accused in the Aircel-Maxis case, including the Maran brothers — Kalanithi Maran and his brother and former Union minister, Dayanidhi Maran.
The company according to analysts will be a key beneficiary of Phases 3 and 4 of digitisation since it has a strong foothold in the competitive southern market. Sun TV is a leading player with a bouquet of 33 channels across southern states—Tamil Nadu, Karnataka, Andhra Pradesh, Telengana and Kerala. During a recent investor conference, the management said digitisation would be completed during 2017-18. Even if around half of subscribers move to DTH, there will be considerable upside in the subscription revenue. This is now Rs 900 crore a year and Sun TV estimates it to jump to Rs 1,800-1,900 crore.
Gains in the Telugu general entertainment genre to the top position (from fourth earlier) in the last 18 months and expectations that Sun TV’s Indian Premium League franchise (Sunrisers Hyderabad) would turn profitable in FY19 have also been perceived favourably by the market. In the coming quarters, how competitive intensity plays out in some of the key southern markets
and improvement in advertising revenues (hit after the note ban) are issues the Street will keep an eye on. While there has been positive news
flow for the company, its promoters still have some legal hurdles to cross, such as the illegal telephone exchange charge. Though there is a 10 per cent upside from the current share price from the targets the brokerages have set, investors should await more clarity on the legal and political fronts before considering an investment in the stock.