In This Article:
The Sandesh Limited (NSE:SANDESH), a ₹6.6b small-cap, operates in the media industry which has seen a significant structural shift resulting from online streaming. Media analysts are forecasting for the entire industry, a positive double-digit growth of 22% in the upcoming year , and an enormous triple-digit earnings growth over the next couple of years. This rate is larger than the growth rate of the Indian stock market as a whole. Should your portfolio be overweight in the media sector at the moment? Today, I will analyse the industry outlook, and also determine whether Sandesh is a laggard or leader relative to its media sector peers.
View our latest analysis for Sandesh
What’s the catalyst for Sandesh’s sector growth?
The industry has become increasingly competitive and dependent on personal recommendations. Over the past year, the industry saw growth in the twenties, beating the Indian market growth of 22%. Sandesh lags the pack with its lower growth rate of 14% over the past year, which indicates the company has been growing at a slower pace than its media peers. Moreover, the trend of below-industry growth rate is expected to continue in the future with Sandesh poised to deliver a 4.6% growth compared to the industry average growth rate of 22%. As an industry laggard, Sandesh may be a cheaper stock relative to its peers.
Is Sandesh and the sector relatively cheap?
The media sector’s PE is currently hovering around 17.68x, relatively similar to the rest of the Indian stock market PE of 17.94x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. Furthermore, the industry returned a similar 11% on equities compared to the market’s 9.3%, potentially illustrative of a turnaround. On the stock-level, Sandesh is trading at a lower PE ratio of 8.13x, making it cheaper than the average media stock. In terms of returns, Sandesh generated 12% in the past year, which is 1.6% over the media sector.
Next Steps:
Sandesh is an media industry laggard in terms of its future growth outlook. This is possibly reflected in the PE ratio, with the stock trading below its peers. If the stock has been on your watchlist for a while, now may be the time to dig deeper. Although the market is expecting lower growth for the company relative to its peers, Sandesh is also trading at a discount, meaning that there could be some value from a potential mispricing. However, before you make a decision on the stock, I suggest you look at Sandesh’s fundamentals in order to build a holistic investment thesis.