Sun TV rises 9% after profit beats estimates

Shares of Sun TV Network on Monday soared nine per cent after the company posted better-than-expected December quarter numbers. The Kalanithi Maran-owned firm posted a net profit of Rs 214 crore for the three months ended December, beating analysts' expectations of Rs 200 crore.

The Sun TV stock ended at Rs 417, gaining nine per cent, the best among BSE 200 stocks.

The stock also reversed a three-day losing streak that saw its share price erode from Rs 414 to Rs 381.

Sun TV, after market closing, reported 15 per cent year-on-year growth in profit and eight per cent sequential growth due to reduction in costs.

"The profit was 11 per cent better than our and consensus estimates due to lower-than-estimated movie amortisation costs, even as the earnings before interest, taxes, depreciation, and amortisation (Ebitda) were in line," said Bijal Shah and Urvil Bhatt, analysts at IIFL, which has an ADD rating on the stock, with a target of Rs 426.

Shares had remained unchanged in 2014, underperforming the benchmark Sensex, which gained 35 per cent. Sun TV shares trade at a one-year forward price-to-earnings multiple of 21 times, at a huge discount to its peer Zee, which trades at 35 times.

"Sun underperformed the market by 37 per cent over the past year due to Central Bureau of Investigation cases on promoters and weakness in ad-revenue growth. Despite these risks, the 55 per cent discount to peer Zee is unjustified. The likely acceleration in ad-revenue growth will drive re-rating," the IIFL report said.

The stock has a 12-month price target of Rs 433, according to the consensus of analysts complied by Bloomberg.

The company also saw an increase in market capitalisation of Rs 1,359 crore to Rs 16,416 crore. Maran owns 75 per cent in the company.