ICICI Securities maintains 'Buy' on Sun TV with revised target price of Rs 800

ICICI Securities has revised downward its target price for Sun TV Network to Rs 800, down from Rs 865 amid recent challenges in advertising revenue. The domestic brokerage maintained a 'Buy' rating, anticipating recovery in the latter half of the financial year 2026. This optimism is attributed to expected consumption tailwinds such as tax cuts and the 8th Pay Commission, alongside linear TV consolidation.

Sun TV's advertising revenue witnessed a 7 per cent year-on-year decline in the fourth quarter of FY25, primarily due to a shift in advertising spends towards cricket events like the IPL. The trend is expected to persist into the first quarter of FY26, yet recovery is anticipated in the second half. Meanwhile, subscription revenue growth is expected to remain tepid.

Despite missing out on the IPL playoffs, Sun TV's revenue from its cricket franchises is projected to remain stable, bolstered by sponsorship agreements. In FY26, the movie pipeline featuring titles such as 'Coolie' and 'Jailer 2' is expected to provide additional revenue growth opportunities.

Shares of Sun TV Network gained 0.91 per cent to settle at Rs 636 on BSE. 

In Q4FY25, Sun TV's consolidated revenue increased by 13.7 per cent quarter-on-quarter but fell by 2.2 per cent year-on-year to Rs 940 crore. Revenue from cricket franchises grew by 6.1 per cent year-on-year to Rs 140 crore. The company announced a total dividend of Rs 15 per share for FY25, with an interim dividend of Rs 2.5 per share in Q4. This reflects a dividend payout ratio of approximately 36 per cent.

ICICI Securities suggests that a higher dividend payout ratio in FY26 could act as a positive trigger for the stock. With a cash reserve of Rs 7700 crore and inexpensive valuations, the stock is expected to re-rate once signs of recovery in ad revenue materialise.

The brokerage underscores the potential for growth in ad revenue over a weak base in FY26. Additionally, it anticipates steady growth in revenue from cricketing franchises. Given Sun TV's valuation, the stock is forecasted to benefit from any recovery in advertising revenue.

Key risks identified include a slower-than-expected recovery in general entertainment channel ad spends and a decline in IPL-related revenue. However, the overall outlook remains positive, with a focus on monitoring the recovery of advertising revenue.