This stock surged 13% in just a day! It has IPL connection too

The week started off with a bang for this company's stock in the markets as investors chased it with gusto! Sun TV share price zoomed 13 per cent in Monday's trade amid lacklustre trend in broader markets. This was after the broadcaster Sun TV Network reported a 22.82 per cent increase in net profit at Rs 289.76 crore for the fourth quarter ended March 31, 2018. The company had reported a net profit of Rs 235.91 crore during the corresponding quarter last year.

The reason behind the up-move was that the total income of Sun TV from operations during the quarter under review stood at Rs 753.79 crore, up 21.60 per cent, as against Rs 619.85 crore during the same period previous fiscal year. 

Reacting to Sun TV Q4 earnings, the stock rallied 13 per cent to Rs 977.25 on the BSE. 

Another positive impact was that IIFL upgraded Sun TV to BUY from Add, with Rs 1,163 target price. The reasoning behind this was: 1) stronger subscription revenue growth estimate than built in earlier; 2) potential improvement in incremental ad revenue growth after only 3 per cent CAGR over FY16-18, 3) limited near-term threat from OTT, given Sun’s strong market share in Tamil Nadu (TN) and overall subscriber base not being OTT-oriented. 
 
"Sun’s robust performance in 4Q 27% YoY Ebit growth) and bullish commentary on subscription revenue outlook make us upgrade our FY19ii/20ii EPS by 7 per cent. We value Sun TV, based on 27x 1YF PE," the brokerage said in a report.

Edelweiss Securities anticipates strong re‐rating in the near term due to robust beat in Q4FY18 on all fronts, ad growth at par with ZEE and Sun TV trading at a significant valuation discount (22.8x FY20E) to ZEE (27.9x FY20E). 

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The brokerage further said that IPL is an additional trigger in H1FY19 aided by new revenue share and blockbuster show of its IPL team. Digitisation in Tamil Nadu is a key stock catalyst. Also, with ratings improvement in key markets, ad growth is expected to improve. We estimate double digit ad revenue spurt to sustain over FY19 and FY20, it said.  

Edelweiss retained target multiple of 28x FY20E EPS to arrive at a target price of Rs 1,064 with a 'buy' rating.