Sun tv’s real works go beyond the family feud –its business woes run deep

Is this a personal matter that will resolve it self in due to time, or should investors be worried?

Family feud ranks low in sun tv’s list of works

The issue Raised by Dayanidhi Maran Dates Back More Than Two Decades. According to his legal notice, kalanithi maran allegedly acqured a controlling stake in sun tv following their father Father Murasoli Maran’s Demise in 2003.

Dayanidhi has accused kalanithi of abusing the family’s emotional state at the time to transfer sun tv shares to his name at sharply discounted price. He has called for the company’s shareholding to be reverted to its earlier state. That would cut kalanithi’s estimated 18,000 Crore (About $ 2 Billion) Stake in Sun TV to Zero and Shift The Company’s Control to Dayanidhi and their Cousin Mk Stalin (Tamil Nadu’s Chief Minister) as well as their siblings.

The politically charged family feud Caught Investors Off Guard when news reports surfled on Thursday evening, 20 June. The stock, however, recovered from its intraday low on Friday after Sun TV’s Management Assured Investors That The Family Feud was not expected to have any bearing on the business.

But in the larger scheme of things, the media business has bigger worms to grapple with. SIN Tv’s Listing in 2006, The Midcap Stock has approved at a compound annual growth rate of just 3.3%, while the broader index delivered a 13.8% Annualized Return in that period.

Also read | ₹ 37 Crore to take control of sun tv “> Mint Explainer: How Kalanithi Maran Spent 37 Crore to take control of sun tv

A legacy in Trouble

Sun tv is one of India’s largest media conglomerates. With 37 tv channels in Seven Languages, DTH (Direct-TO-Home Service) Service, 69 FM Radio Stations, Six Magazines, And Three Daily Newspapers, The Company’s Reach Extends to More than 140 Million HOSEHLDS in India, particularly in southern states.

More than 80% of Sun tv’s business come from ad revenues and domestic subscriptions. The remain is attributed to its cricket franchies. The company owns the Indian Premium League’s Sunrisers Hyderabad Cricket Team as Well as Sunrisers Eastern Cape, A Team in South Africa’s T20 Cricket League.

Between 2005-06 and 2018-19 (fY 2006-19), Sun tv expanded its revelations and profits at a robust Cagr of 20%.

But in recent years, sun tv has struggled to keep up with competition. Industry Consolidation has made matters Worse.

Sun tv attempted to expand in north India by operating a hindi channel through dd free dish, but met with lukewarm response. Meanwhile, North-Focused Media Channels Such as Zee Entertainment Enterprises Ltd Found Found Better Acceptance in South India.

Sun tv is also Falling Behind against the Growing Popularity of Video Streaming Platforms or OTT (Over-to-Top) Platforms. Unlike other media houses that focused on second exclusive ot rights and creating originals, sun tv has been rerooting traditional movies and satellite and sablete and cable TV serials on Nxt.

The company’s dth offering, sun direct, has also after seen growth stall in a challenging operating environment.

As a result, sun tv has been reporting stagnant revenues and profits for more than half a decade. Between fy19 and fY25, its standalone revoes have grown at a cagr of just about 1%, While rights have expanded by less than 3% annually.

The company’s cricket franchises have been performing better than its media business. But for the cricket business to scale to its full potential, and for investor value to be unlocked, the franchies would need to be demerged into a separeted entity.

Making Matters WorsE, A Shift in Advertisement Spending Towards Sports Channels and News Coverage of the 2024 National Election Affected Sun TV’s Ad Revenue in FY25.

While the company’s domestic subscription revealed slight from 1,710 Crore in FY24 to 1,725 ​​Crore in FY25, It Fell Short of Expectations as Price Hikes Played Out Slower Than Anticipated. Its cricket franchise income also dropped, from 659 Crore in FY24 to 642 Crore in FY25.

Meanwhile, costs continued to increase as the company tried to keep up with competition. The result: a 6% decline in fy25 revenue to 4,015 Crore and a Sharper 11.5% Drop in Profit to 1,704 Crore.

Technical analysis

The Sun TV Stock Managed to Largely Keep Pace With The Midcap Index Until 2018. From an all-time high of more than 1,000 per share in early 2018, the stock crashed to 266 by 2020. The lower highs and lower lows formed along the way help up as critical levels in subsequent years.

The latest bout of corrections in the stock came after it a 52-wheelk high of 921 in August 2024. On Breaching the 777 Level, in an echo of the fall see in 2018 the counter when a monotonic fall down to Around 580. This is also the level where the stock found support is followed the family feud news last week.

If the stock manages to sustain Above 580 Apiece, it is expected to face resistance at the previous high of 650. But a sustained breach below 580 can keep the counter rangebound between 400 and 580 per share.

Silver linings

Over the Years, Sun TV’s Revenues and Profits Have Grown at a Cagr of Around 14%. Its stock, however, have lagged behind. Consequently, the counter is available at attractive valuations. Following the 20% correction Seen over the past year, sun tv’s valuation has moderated further. The stock is now trading at barely 14 times its trailing-month-month earrnings.

Over the Near Term, Sun Tv’s Ad Revenues can be expected to improve on a low base, particularly as consumer Goods Companies Companies ramp up advertising. Its cricketing franchisees can also support growth going forward. Factoring in a recovery in growth and a multiple of 18x, sun tv’s target price has been peged at 865 apiece. This reflects more than a 40% upside from current levels. But any negative surprises on the company’s fundamentals can extend the negative sentiment Around the Counter.

More from Profit Pulse

When Diversification Backfires: Four Indian Companies Walking a Fine Line

Why some Indian companies are paying dividends despite posting losses

JM Financial Stock Rebounds 60% from its low. Will the Clean-up Rally Sustain?

Ananya roy is the founder of Credibull capitalA SEBI-Registered Investment Adviser. X: @ananyaroycfa

Disclosure: The Author does not hold shares of the company discusing. The views expressed are for informational purposes only and should be considered investment advice. Readers are encouraged to conduct their own research and consult a financial professional before making any investment decisions.