Sun TV shares surge 115% in 16 months, reaching 5-year high—will the rally continue?

Shares of Sun TV Network, have been strengthening in recent months, reaching multi-month highs and trading near their all-time peaks. From a price of ₹415.85 in March 2023, the shares have surged 115% to their current price of ₹890. For the first time in 5 years, the stock has crossed the ₹900 mark during Thursday's trading session. 

The stock registered an all-time high of ₹1,097.80 in January 2018 but then entered a correction phase that lasted until March 2023, resulting in a 60% decline. However, the stock resumed its upward trajectory in April 2023 and is now just 5% away from its all-time high. Analysts believe that SUNTV is likely to surpass this previous peak.

Rajesh Bhosale, Equity Technical and Derivative Analyst at Angel One, said, "SUNTV has experienced a remarkable rally over the past few months and is currently consolidating around its 2018 high of 900."

“We anticipate that this upward trend will continue, with prices potentially reaching four-digit levels. Therefore, any dip or period of consolidation may be viewed as a buying opportunity. There is strong support around the 840 level.”

In June, domestic brokerage firm ICICI Securities upgraded its rating on the stock to 'buy' and set a target price of ₹1,000 per share, citing the potential medium-term benefits from increased ad spending by FMCG companies.

Additionally, the brokerage anticipates steady revenue growth from cricket franchises. It noted that advertising and promotion (A&P) spending as a percentage of revenue increased by 180 basis points year-on-year for the top five FMCG advertisers in India in FY24.

However, the impact on revenue for general entertainment channel (GEC) TV broadcasters was limited due to a strong cricket season diverting ad spend and a shift towards digital media for promoting premium product categories amidst rural market weakness.

Sun Network continues to maintain its presence across genres such as general entertainment, movies, music, news, kids, and lifestyle. While it holds a significant market share in the four southern states of India—Tamil Nadu, Kerala, Karnataka, and Andhra Pradesh—the network has recently expanded to include Bangla and Marathi languages.

In the coming years, the company expects a substantial increase in revenue contributions from its cricket franchise, further supported by incremental revenues from movie distribution.

The Indian media and entertainment (M&E) industry is poised for significant growth, driven by rising consumer demand and improving advertising revenue. The M&E sector has continued its robust growth trajectory.

Television remains the largest segment, while digital media has cemented its position as a strong number two, followed by a resurgent print segment. The filmed entertainment sector has also recovered, with theatrical releases doubling and reclaiming the fourth position, overtaking online gaming.

The increasing availability of fast and affordable internet, rising incomes, and the growing purchase of consumer durables have significantly bolstered the industry. India's media and entertainment sector stands out globally due to its high volumes and rising average revenue per user (ARPU).

This has positioned India as a leader in digital adoption, providing companies with rich data to better understand their customers. Additionally, India has seen growing opportunities in the VFX sector as the global focus shifts to India as a preferred content creator.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.