'Buy' maintained on Sun TV - TP Rs.335 - Geojit BNP Paribas Financial Services Limited

- Target price is reduced from Rs.390 to Rs.335 as the EPS for FY13& 14 cut by around 5% due to weak earnings.

- The company reported weak performance for 4QFY12. Revenue, EBITDA and EPS for the quarter declined by 2%, 6% and 4% respectively.

- Weak performance was due to decline in advertisement revenue, which fell 9% yoy because of weak advertisement spend and weak rating.

- The company has not yet been able to sign a deal with Arasu Cable and this has also affected performance.

- Considering all these factors, EPS estimate has been cut by 4.7% for FY13 and by 5.4% for FY14. Hence the cut in target price.

- The company faced multiple headwinds such as slowdown in advertisement revenue, failure to sign a deal with Arasu Cable etc, leading to a 10% decline in EPS.

- It is expected that advertisement revenue to improve in FY13 and expected to grow 8%.

- On the subscription side, digitization and a deal with Arasu Cable are key catalysts for the stock.

- The stock has traded at a high P/E of 27 on strong profit growth earlier. But, the P/E has been de-rated to lower levels in the past one year and is traded nearly 13 P/E at the price range of Rs.247 range. At this level, the stock provides good dividend yield of 3.8%.

- Current target price is arrived at a P/E multiple of 15 on FY14 expected earnings.

Source : Equity Bulls

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