Sharekhan sees potential for good gains in the media stocks of Zee Entertainment and PVR. Here are some details on why to buy the stocks as picked from the brokerage firm's research report.
Buy PVR, says Sharekhan
PVR Limited (PVR) is India's largest multiplex player in terms of screen counts, which stand at 9% and 27% of its total screens in India and total multiplex screens, respectively and has the strong brand equity value. According to Sharekhan, PVR is India's premier multiplex player that leads with the most number of screens, clocks higher revenue per screen and has a premium screen portfolio. It has 98 luxury screens (12% of total) and is expected to grow going ahead.
Except a few states including Maharashtra, Kerala, etc, many states have permitted resumption of operations in cinema halls from July 30, 2021.
"Given a huge content line-up, we believe PVR is well-placed to capitalise on strong pent-up demand and is expected to report strong revenue growth in FY2023E," Sharekhan has said.
PVR: Strong presence, buy with a price target of Rs 1900
The broking firm sees an upside potential of nearly Rs 1,900 from the current market price of Rs 1566. "The strong recovery of occupancy rate with the release of big-starrer movies and anticipated improvement in its profitability and return ratios are expected to re-rate its multiples going ahead. We also believe the multiplex business is going to be a sustainable model in the long term given Indian movie-goers' strong appetite for the silver screen. Hence, we initiate Buy rating on PVR with a price target of Rs. 1,900," says broking firm Sharekhan.
Buy Zee Entertainment for a price target of Rs 400, says Sharekhan
ZEE Entertainment& Sony Pictures Networks India have entered into a non-binding term sheet to merge themselves. This will create the largest media company with a market share of 25% in India.
According to Sharekhan, the merged entity will be well-placed to maximize revenue given its strong potential to reach a larger number of advertisers. Synergies would have an impact of 6-10% on revenue.
Zee Entertainment to benefit from merger
According to Sharekhan, the proposed merger would be a strategic fit from a revenue perspective as it would strengthen Zee Entertainment's portfolio with sport, kids and English movie properties.
"Further, with the infusion of growth capital of $1.6 billion by Sony Pictures, the combined entity's cash balance would increase to $1.8 billion, which would be used to accelerate its digital platform growth and invest in premier content including sports. We believe that corporate governance concerns will get addressed with the controlling stake of Sony Pictures and this will trigger multiple re-ratings for Zee Entertainment. The stock is currently trading at a reasonable valuation at 20x/18x of FY2023E/FY2024E earnings estimates. Hence, we maintain a Buy rating on Zee Entertainment with a revised rice target of Rs. 400," the brokerage has said.
The above stocks are picked from the brokerage report of Sharekhan. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.