Sun TV Shares Jump 25% Post Court’s Clean Chit to Marans

Judge­ment trig­gers a spate of up­grades from bro­ker­ages for the broad­cast­ing co

The Economic Times - - Markets: Beating Volatility - Anandi.C@ times­group.com Mar­ket In­tel­li­gence

Mum­bai: Sun TV Net­work soared as much as 25% on the NSE on Fri­day, its high­est sin­gle­day gain since its list­ing in April 2006 after a spe­cial court dis­charged all charges against the com­pany’s founder in the AircelMaxis case.

The judge­ment trig­gered a spate of bro­ker­age rat­ing up­grades on Sun TV, whose stock fu­tures were the most ac­tively traded on Fri­day.

Sun shares closed 24.2% higher at .₹ 685.20 on Fri­day after hit­ting a 52-week high of .₹ 699 ear­lier in the day. CLSA raised its rat­ing on the stock to buy from sell and in­creased its tar­get price to .₹ 661 from .₹ 438.

Ko­tak In­sti­tu­tional Eq­ui­ties too up­graded the stock to buy from add and raised the tar­get price to .₹ 700 from .₹ 525 after the verdict. Shares of Reliance Com­mu­ni­ca­tions also rose up to 15% on hopes the judge­ment would pave the way for com­pany’s merger talks with Air­cel. Maxis owns ma­jor­ity shares in Air­cel.

The Air­cel-Maxis case was based on the al­le­ga­tion that Dayanidhi Maran, brother of Sun founder Kalanithi Maran, as the union tele­com min­is­ter had tried to pres­surise Air­cel into let­ting go of its stake to Maxis in re­turn of an in­vest­ment of .₹ 549 crore in Sun Di­rect. “The main over­hang in form of the court case is gone,” said AK Prab­hakar, head (re­search), IDBI Cap­i­tal Mar­kets.

“The judge­ment could be chal­lenged in the near term, de­spite that the val­u­a­tions at cur­rent lev­els look far more at­trac­tive than those of peers.”

Sun TV’s val­u­a­tion is at 23 times FY18 earn­ings com­pared to peer than Zee En­ter­tain­ment, which is val­ued at 49 times its FY18 earn­ings.

The third phase of digi­ti­sa­tion would also ac­cel­er­ate rev­enue growth from sub­scrip­tion for the com­pany while the po­lit­i­cal HIGHS & LOWS en­vi­ron­ment in Tamil Nadu could help in rev­enues from the film pro­duc­tion busi­ness, said an­a­lysts. “Nearly 60% share of sub­scrip­tion rev­enue from South In­dia ac­crues to Sun TV Net­work,” said Prab­hakar of IDBI. A CLSA note said that the re­duc­tion in le­gal and po­lit­i­cal risks could be a sig­nif­i­cant share price cat­a­lyst.

A to­tal of 18.98 lakh shares changed hands on the BSE com­pared to its two-week av­er­age of 0.86 lakh shares.

Sun stock fu­tures’ open in­ter­est or out­stand­ing po­si­tions de­clined 7.51% on Fri­day after gain­ing as much as 30% ear­lier in the day as traders cov­ered their short po­si­tions. “There were more of short po­si­tions which were cov­ered dur­ing the day. This is why open in­ter­est fell to 7.51%. But, there was con­sid­er­able build-up of long po­si­tions. Had there been only short po­si­tions, the fall in open in­ter­est would have been greater,” said Ashish Chatur­mo­hta, head (tech­ni­cals & de­riv­a­tives), Sanc­tum Wealth Man­age­ment.

Na­graj Shetti, tech­ni­cal re­search an­a­lyst, HDFC Se­cu­ri­ties, ad­vised against buy­ing the stock at th­ese lev­els.

“One could rather look at buy­ing at .₹ 650 lev­els. It could go up to .₹ 725 in a month’s time,” said HDFC Se­cu­ri­ties’ Shetti.

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