M&E stocks begin to look up with the unlock in India Inc
Experts, however, advise investors to err on the side of caution and keep a close watch on the market in the coming months
Media stocks have been seeing some gain from mid-June with relaxation in curfew rules and businesses opening up. The uptick has hinted at the beginning of a recovery in the sector. However, market experts advise investors to maintain caution and keep a horizon of 18-20 months for performance on the number sides when it comes to media companies.
Media and entertainment companies comprising of broadcasters, multiplex operators, print publishers and production companies were adversely impacted in the wake of the second wave of the coronavirus pandemic. With dwindling top lines, most of these companies started the new fiscal on a low note. However, the relaxation of lockdown rules and the return of advertisers brought cheer to not just revenues but also the stock prices of these companies.
Stocks of INOX Leisure Limited that had touched Rs 253 around mid-April is now at Rs 320. Stocks from another entertainment company PVR Cinemas had touched Rs 1062 approximately in mid-April is currently priced at Rs 1423.25.
Coming to print media, Jagran Prakashan Ltd. stocks that were at Rs 58.15 around April 15 is presently priced at Rs 66.20.
A recent report from ICICI Direct Research Desk said, “We expect the ad outlook to remain challenging in H1FY22E due to subsequent impact of second-wave and the possibility of a third wave that would push economic recovery in FY23E only. One key attractive feature of Jagran has been strong distribution to shareholders in the form of dividend and buyback. We maintain BUY rating with a revised target price of Rs 70.”
“One should be very cautious about investing at the moment because of the euphoria in the market where everything is moving up. However, if we talk of media companies it is definitely the ones with a digital presence especially on the content production side that have a scope to perform better in the near future. Balaji telefilms, Zee, Sun TV are some of the stocks that have the scope of picking up. However, investors should look at a horizon of 18 to 20 months for these companies to pick up performance on the number side. For multiplex brands like Inox and PVR better numbers are anticipated as lockdown relaxes completely and big-ticket releases are back to theatres,” said Rajesh Agarwal, Head of Research at AUM Capital.
Earlier this month, reports from Elara Capital said, “We maintain BUY on ZEEL/TVTN with a TP of Rs 300/370 within broadcasters in the listed media space. The visibility of a turnaround in digital offerings to tap better growth versus industry averages may lead to near-term multiple re-rating. Within the regional genre, Sun TV, the market leader in the Tamil genre, may show re-rating potential in the near term, only basis successful execution of digital initiatives, even as global OTT giants continue to disrupt the space on higher content costs (Hindi and regional)”.
Zee Entertainment Enterprises that was touching close to Rs 180 in mid-April is now at Rs 216.75. Sun TV touched Rs 538 from around Rs 464 in the same period and TV18 from Rs 27 to Rs 45 in the same period.
Talking about the changing media scenario, Pranjal Kamra, CEO at Legal and Financial Services, Finology said, “Though advertisers made a strong comeback in the fourth quarter of 2021, the pandemic has caused some permanent effect on the traditional media. There has been a continuous change in content consumption pattern and due to this, ad budgets have started shifting from TV to digital mediums. The gap between the ads payout on TV and digital mode is widening every year. Digital, which attains a market share of 35%, has overtaken print media with a 16% market share and is closing this gap with the television sector having a market share of 45% in the media sector.”
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