Sun TV Network hits 52-week low, stock down 10% in two trading sessions

In the last one year, Sun TV has underperformed the market by falling 24 per cent, as against a 0.1 per cent gain on the S&P BSE Sensex.

Shares of Sun TV Network hit a 52-week low of Rs 402.55, down 1.5 per cent on the BSE in Thursday’s trade in an otherwise firm market. The stock of the TV broadcasting & software production company has declined 10 per cent in the past two trading sessions, erasing its entire gain recorded after conclusion of the much-awaited Indian Premier League (IPL) rights for 2023-27.

Shares of Sun TV fell below its previous low of Rs 403 touched on May 19, 2022. At 10:14 AM, the stock traded almost flat at Rs 409, as compared to 1.1 per cent rise in the S&P BSE Sensex at 52,387.

Sun TV Network is one of the largest television broadcasters in India, operates satellite television channels across six languages of Tamil, Telugu, Kannada, Malayalam, Bangla and Marathi, airs FM radio stations across India and owns the SunRisers Hyderabad Cricket Franchise of the Indian Premier League and the Digital OTT Platform Sun NXT.

The significant increase in the cost of media rights is a positive for team owners like Sun TV as it would increase annual profit after tax (PAT) from Rs 73.3 crore in FY22 to Rs 300 crore in FY24. IPL PAT will be entirely translated to free cash flow (FCF) for the company, as it does not entail any annual capex or working capital, analysts at Emkay Global Financial Services said in media & entertainment sector update.

The lack of clarity on the strategy for the underlying broadcasting and digital (SUN NXT) businesses, along with the cash pile, restrict meaningful value creation for shareholders although the stock looks inexpensive from a valuation perspective. That said, there could be some trading uptick in the stock. However, due to above-mentioned factors, institutional investor interest would be low, the brokerage firm said.

The key winner in the overall bid process would be BCCI and the franchisees which stand to gain higher annual revenues. Note that out of central pool, BCCI pays out 50 per cent of rights money to franchisees (including 5 per cent as prize money). Thus, this higher bid will likely result in incremental Rs 250- 300 crore of annual revenues for each teams from FY24 onwards, including Sunrisers Hyderabad, owned by Sun TV.

The bottomline economics will be determined by how the cap on players’ salaries (currently at Rs 80 crore) and other expenses changes for the franchise, given the higher revenues availability, analyst at ICICI Securities said in media sector update.

In the past six months, Sun TV has underperformed the market by falling 18 per cent, as compared to 9 per cent decline in the S&P BSE Sensex. While, in the last one year the stock has slipped 24 per cent, against 0.07 per cent rise in the benchmark index.