Media stocks, led by Zee Telefilms, Mukta Arts and Tips Industries, had a good run in the last few weeks. Interest in these stocks was generated and sustained for two main reasons. Media stocks had been beaten down so severely since the technology meltdown that they had to go up. Secondly, earnings of some of the media companies are far more visible and sustainable than those of the technology companies. This has prompted investors to hike their stakes in this sector.
Mr. Subhabrata Majumdar, analyst at Motilal Oswal Securities said, earnings visibility, stability of revenue and completely beaten down valuations are the factors responsible for the recent rally in media stocks.
Further buying is likely to be sustained by the fact that an average growth of 25 per cent, across the board, is predicted for this sector. This is also another reason for the feel-good factor working for the media sector.
Specific stocks that have been in the limelight include Zee Telefilms, which has just announced its intention to induct a foreign strategic partner. The ratings of Balaji’s serials, and its dissociation with Kerry Packer’s Nine Network, is what is driving buying in the stock.
On the other hand, the impending release of the Hrithik Roshan-Kareena Kapoor starrer Hindi movie “Yaadein” is driving buying at the Mukta Arts counter. This is the latest film from the Subhash Ghai stable.
Tips Industries, which bought the music rights of Yaadein for Rs 9.1 crore, is also headed north due to its association with the movie, which is being seen as a likely blockbuster. All these companies have seen their price-earnings ratios going up.
The sharp spurt in the prices of some leading media stocks is also partly due to the fact that there are limited number of good buys in this sector, according to Mr Kapoor of First Global. Many companies are small local players with the their revenue coming from one or two programs.