Maintain 'buy' on Sun TV – TP Rs.320 - Geojit BNP Paribas Financial Services

- Target price has been cut to Rs.320 from Rs.335, as the EPS estimates for FY13/14 were cut by 3% and 6% respectively on lower broadcast revenue expectations.

- 1QFY13 has been slightly lower than market expectations. Revenue, EBITDA and EPS missed estimates by 3%, 6% and 5% respectively.

- Revenue was down due to decline in broadcast fees.

- EBITDA margin was down due to investment in non-fiction content. This would reverse from next quarter as costs normalize and cable revenue returns.

- The company faced multiple headwinds in FY12 but a recovery is expected going forward due to return of Tamil Nadu Cable revenue post the signing of the deal with Arasu, recovery of advertisement revenue as key sectors like FMCG have increased ad spent, digitization continues to remain a medium term catalyst and also due to high dividend payout prospects.

- At the target price of Rs.320, Sun TV is valued at 15 P/E of FY14 expected EPS and Sun TV is preferred to Zee Entertainment on valuation front.

- CBI investigation on Sun's promoters is the key risk and overhang on Sun's shares.

Source : Equity Bulls

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