Sun TV shares jump 25% post court's clean chit to marans

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 . 685.20 on Friday after hitting at ` 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 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 buy . 650 levels. It could go up to ing at ` . 725 in a month's time,“ said ` HDFC Securities' Shetti.