Reiterate 'buy' on Sun TV - TP hiked to Rs.500 - Geojit BNP Paribas Financial Services

- 'Buy' rating on Sun TV is reiterated with an increased target price of Rs.500 as against the earlier target price of Rs.320. Increase in target price is due to a combination of factors such as higher EPS estimates, higher P/E multiple of 20 against 15 earlier and rollover of the estimates to December 2013.

- The company produced better result for 3QFY13 and it appears that improved performance would continue in FY14.

- Sun TV's advertisement revenue rebounded to 20% yoy, which is 8% higher than analysts' estimates.

- Subscription revenue increased 20% and EBITDA margin improved 150 bps to 77.5%.

- Advertisement spends are rebounding while digitization benefits should start showing over the next two quarters.

- Estimates for FY14 and FY15 have been raised by 5% and 8% respectively and the 'buy' rating on the stock has been maintained.

- It is expected that Sun TV's EPS growth to rebound to 25% in FY14 after a 10% decline over the last two years. The company has reported 20% advertisement revenue growth and sounded confident about strong advertisement revenue in FY14.

- It is also believed that the company is well positioned on the subscription side to benefit from digitization in its 6 key cities in phase 1 and 2. 19% growth is assumed in FY14.

- The company's P/E multiple has been rerated on the back of improving growth prospects and lower regulatory concerns.

Source : Equity Bulls

Keywords