SUN TV : Stock Outlook

After the PIL on Dayanythi maran was filed, his brother Kalanith Maran owned company shares fell sharply. The extent of fall has so sharp like a fall from the cliff. SUN TV tanked 27% on a single day from Rs.362 to Rs.262. That is a straight Rs.100 shave. Similarly Spice Jet tanked 16%. As usual many investors got interested in this stock which had corrected more than 30% in just 3 days. Many investors would be wondering wheather to buy the stock now or avoid it.

Here is our view on both these stocks:

Sun TV was listed in April 2006
The allotment price was Rs.875 per share.
In July 2007 the stock announced 1:1 Bonus.
Hence the holding cost of original allotment Rs.437.50
The company has been regularly declaring dividends.
And its Consolidated profit surged 45% in FY 2011

Sun Network consists of:
This family well established in Media, Sun Network (Sun TV, K TV, Sun Music, Sun News, Chutti TV, Adithya, Surya TV, Kiran TV, Gemini TV, Gemini Movies, Gemini News, Gemini Music, Gemini Comedy, Kushi TV, Udaya TV, Udaya Comedy, Udaya 2, Udaya Movies, Udaya Varthegalu & Chintu TV.) and newspaper (Dinakaran, Tamizh Murasu, Kungumum, Mutharam, Vannathirai, Kumguma Chimizh).

Sun Products: (which SUN TV now clarifies is a seperate company and not linked to Sun TV)
Sun Direct, Sun Direct HD, Kal Publications.

Our Views:
Though SUN TV claims that 60% of its revenue is from outside Tamilnadu, it is obvious that Tamilnadu is its home turf and any change in regulation in Tamilnadu ( which is more likely) is to affect SUN TV's performance and profitability.

For instance @ proposed Rs.50 Government Cable TV, mass of viewership is likely to switch over from Satellite Dish TV. And this Satellite TV business consists of players like Dish TV, TATA Sky, Sun TV etc.

But if the Arasu Cable doesnot telecast Sun TV channels, then the viewership will fall. As a result Ad revenus will fall impacting profitability directly. To overcome this barrier (for next 5 years atlest), SUN has to go in for exclusive, top class products and production.

Added to that is the constant pledging of promoters shares of SUN TV. Any further fall in SUN TV price ( on likely investigation or chargesheeting ), margin call could trigger resulting in further crash in stock price.

In all permutation and combination, SUN TV's profitability is likely to fall sizable in the days to come. Hence it is wiser to stay away from SUN TV at the moment. We can bottom fish at some point of time in future.


Regarding Spice Jet, they operate in domestic airspace across india. But for the money trail to Spicejet, which we cannot comment right now, Spice jet is a better bet. With commencement of International flying shortly, Spice jet @ Rs. 35 per share is likely to do well. Its profit has grown 64% in the last financial year. From a recent high price of Rs.90 per share in Nov 2010, the current price of Rs.35 is at 61% discount. That may sound like fibbonachi number. But fundamentals may support Spicejet.


.