Citi Hikes Sun TV’s Price Target On Anticipated IPL Revenue Boost
The company remains a top pick in the Indian media space, Citi said in the report.
Citi Research raised its target price on Sun TV Network Ltd. to Rs 965 from Rs 930, while maintaining a ‘Buy’rating on expectations of higher gains from the media firm’s Indian Premiere League franchise SunRisers Hyderabad.
The company remains a top pick in the Indian media space, Citi said in a report on Friday.
Sun TV’s consolidated revenue is likely to grow at 13 percent compounded annual growth rate over FY17-19 as recent broadcast rights and sponsorship terms boost IPL revenue by Rs 100 crore per year from the next season, according to Citi.
Star India recently won the media rights for IPL for over Rs 16,300 crore for five years compared to Rs 8,200 crore for 10 years in 2008. All IPL team owners thus stand to gain an additional revenue of Rs 110 crore per year, as per Citi’s calculations.
Sun TV, which is the only broadcasting firm in India to own an IPL team, SunRisers Hyderabad, therefore stands to earn more revenue.
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Citi expects Sun TV’s advertising and domestic subscription revenue would pick up as the market normalises post disruptions on account of demonetisation and Goods and Services Tax implementation.
Sun TV is the largest player in Tamil Nadu, with 60 percent of its revenue coming from the state government. Over the next three years, its consolidated advertising revenue is likely to grow at 12 percent CAGR, Citi said.
Cable subscription revenue is likely to grow at 30 percent next year as Tamil Nadu moves towards digitisation. Though cable digitisation started in 2012, Tamil Nadu is the only market where the digitisation did not take place. However, early this year, Arasu, the largest cable distributor in Tamil Nadu, got the provisional licence for digitisation. This will benefit Sun TV in terms of higher subscription revenue. The company currently earns Rs 2 per subscription a month as compared to Rs 15-20 to Rs 44 for other cable/DTH subscription.
However, any delay in digitisation, higher competitive intensity and regulatory concerns (12 minutes advertising per clock hour cap) could impact Sun TV’s revenue in the near term, Citi cautioned.
