05/02/2013

Buy Cairn India Ltd


Outlook
Post receiving exploratory approvals, Cairn India is confident of achieving their FY14 exit run rate of 2,00,000 bpd. Further, regulatory clearance for crude oil production, commercialization of gas from the Rajasthan field, and aggressive production from fields beyond Rajasthan assets are likely to drive growth further. Despite delays in ramp up of capacities, we remain confident on Cairn’s ability to ramp up volumes in Bhagyam field and Aishwarya field and expect Cairn’s volumes to spurt in FY14. At a CMP of Rs. 328 the stock is trading at 6.2x and 6.5x its estimated earnings for FY14E and FY15E and we recommend a BUY on the stock.
Key Takeaways
• Cairn India’s net profits grew by 40% to Rs 3,156 crore primarily driven by the forex gain of Rs 230 crore and adjustment of Rs 180 crore owing to the transfer of Indian business to the subsidiary of the company. However, revenues were 4% lower QoQ at Rs 4,278 crore led by the lower crude price realization from higher light-heavy crude price differential.
• EBITDA (Excl. OI) for Q3FY13 grew by 38% YoY to Rs 3259 crore led by the higher production. However, lower sequential production and lower oil price realization led to 4.9% QoQ fall in EBITDA. PAT stood at Rs 3156 crore in 3QFY13, up 33.9% YoY and 33.3% QoQ. Other income for the quarter stood at Rs 418 crore on qoq basis.
• During the quarter, the gross production from the Rajasthan block stood at 1824 bopd (1,69,977 bopd in Q2FY13). The Mangala and Bhagyam field produced at the rate of 1,50,000 bopd and 25,000 bopd respectively. The company has revised its crude oil production target to 200-215kbpd by CY13-end as compared to its earlier target of 240kbpd by CY13-end. It will include 150,000 bopd from Mangala, 40,000
bopd will be from Bhagyam, 10,000 bopd from Aishwariya, and incremental 15,000 bopd will be from the past discoveries for which Declaration of Commerciality has already been filed.
• Aishwariya field development is on track and expects to commence production by end of FY13.Buy Swaraj Engines Ltd For Target Rs.544


Swaraj Engines Ltd is primarily engaged in the manufacturing of diesel engines, diesel engines components as well as its spare parts.
During the third quarter, Revenue for the quarter rose 5.94% to Rs. 1245.70 million from Rs.1175.80 million, when compared with the prior year  period
Swaraj Engines Ltd is in development of the 50 HP+ engine.
The company undertaken an expansion project to increase annual capacity to 75,000 engines in 2 phases while 1st phase of expansion to  increase to 60,000 engines per annum.
The engine sales volume posted a growth of 17% during the year under review & reached 55,239 units as compared to previous year sale of 47,413 units.
Net Sales and PAT of the company are expected to grow at a CAGR of 14% and 12% over 2011 to 2014E respectively.

Results updates- Q3 FY13
Swaraj Engines Ltd is in business of supplying engines to swaraj division of Mahindra & Mahindra Ltd & supply of hi-tech engine components in India, reported its financial results for the quarter ended 31st Dec, 2012. The Third quarter witnesses a healthy increase in overall sales of the company.
The company’s net profit decline to Rs.137.60 million against Rs.140.80 million in the corresponding quarter ending of previous year, an decrease of 2.27%. Revenue for the quarter rose 5.94% to Rs. 1245.70 million from Rs.1175.80 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.11.08 a share during the quarter, registering 2.27% decrease over previous year period. Profit before interest, depreciation and tax is Rs.219.90 millions as against Rs.193.10 millions in the corresponding period of the previous year.

Outlook and Conclusion
The company performance for the financial year 2011-12 yet achieving new highs by taking the full advantage of enhanced engine demand from Mahindra & Mahindra Ltd - Swaraj Division for the first time has crossed the 50,000 mark both for production and sale of engines. The timely increase of production capacities coupled with productivity improvement initiatives enabled to achieve the milestone.
At the current market price of Rs.486.00, the stock P/E ratio is at 10.62 x FY13E and 9.87 x FY14E respectively.
Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.45.77 and Rs.49.25 respectively.
Net Sales and PAT of the company are expected to grow at a CAGR of 14% and 12% over 2011 to 2014E respectively.
On the basis of EV/EBITDA, the stock trades at 5.90 x for FY13E and 5.39 x for FY14E.
Price to Book Value of the stock is expected to be at 2.69 x and 2.28 x respectively for FY13E and FY14E.
We expect that the company surplus scenario is likely to continue for the next years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.544.00 for Medium to Long term investment.
  Buy United Phosphorous Ltd for upper target of Rs.170- 175+


Company Profile: United
Phosphorus Limited manufactures and sells agrochemicals, industrial chemicals, chemical intermediates, and specialty chemicals in India and internationally. Its products include fungicides, insecticides, herbicides, rodenticides, fumigants, and plant growth regulators; and industrial and specialty chemicals, caustic chlorine, and white phosphorus. The company also provides sorghum, oil seeds, rice, cotton, and vegetables; hybrid rice seeds; and dairy forage, sheep/goat forage, horse/stud forage, wild life forage, and silage seeds primarily under the Advanta and Nutrifeed brands. In addition, it offers fruits and vegetables decay control products, such as detergents, fungicides/disinfectants, anti-scalds, coatings, sprout inhibitors, and equipment. United Phosphorus Limited was founded in 1969 and is headquartered in Mumbai, India.
Equity & Share Holding Pattern: It has an equity base of Rs.92.36 cr. that is supported by reserves of around Rs.4080.75 cr., which is 44.18 times its equity. It has a share book value of Rs.77.02. The promoter holding in UPL is 28.08%, FII hold 35.67%, DII hold 16.18% while investing public holds 20.07% stake in the company.
Share Profile: Its shares with a face value of Rs.2 are listed on the BSE under the A group. Its share price touched a 52 week high/low of
Rs.168.65/105. At its current market price of Rs.139, the company has a market capitalization of Rs.6309crore.
Financial Performance: Net profit of UPL zoomed 165% to Rs.137.69crore in the quarter ended September 2012 as against Rs.51.90crore
during the previous quarter ended September 2011. Total turnover rose 4.52% to Rs.1856.02crore in the quarter ended September 2012 as against Rs.1775.70crore during the previous quarter ended September 2011.
In the H1FY13, the company has reported net profit of Rs.304.91crore against Rs.238.53crore in previous corresponding year. Total sales reported to Rs.4078.17crore in the H1FY13 as against Rs.3637.84crore during the H1FY12. The company reported EPS of Rs.3.03 for Q2FY13 while for H1FY13 it has reported EPS of Rs.6.70.
Dividends: The Company has been paying dividend as follows: FY09: 75%, FY10: 100%, FY11: 100% and for FY12 it has paid 125% dividend on a face value of Rs.2 per share.
Technical Trends:

Future outlook & Conclusion: At its current market
price of Rs.139, the share price discounts less than 10 times its FY2013 EPS (E) of Rs.14.6. in the light of its highly encouraging performance in last FIVE year, bright prospects going ahead, the shares of UPL is likely to provide steady growth to the portfolio. Therefore we recommend a buy in the stock of UPL from a short to medium term perspective with stop loss of 125 levels for the target of Rs.170---175+…
  Buy Pratibha Industries Ltd For Target Rs.60.00





Pratibha Industries Ltd, together with its subsidiary, Pratibha Infrastructure Private Ltd, operates as a construction and infrastructure  development company in India.
* Pratibha Industries Limited is engaged in the business of integrated infrastructure solutions and manufacture of SAW pipes.
* During the quarter, the robust growth of Net Profit is increased by 30.57% to Rs. 213.29 million.
* In the quarter under review, the company commenced operations in its Delhi Metro Rail Corporation car park project. It has leased nearly  half of its 200,000 square feet at an average of Rs 165 per square feet.
* Pratibha Industries Ltd has bagged orders worth Rs. 1491.59 Crores in Tunnelling and Building segments.
* Pratibha Industries Ltd order book position has surged to a record level for the first time in the history, stood at Rs. 7170 Crores.
* Net Sales and PAT of the company are expected to grow at a CAGR of 24% and 14% over 2011 to 2014E respectively.

Outlook and Conclusion
* At the current market price of Rs.52.00, the stock P/E ratio is at 5.50 x FY13E and 4.92 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.9.46 and Rs.10.57 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 24% and 14% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 4.06 x for FY13E and 3.41 x for FY14E.
* Price to Book Value of the stock is expected to be at 0.82 x and 0.71 x respectively for FY13E and FY14E.
* We recommend ‘BUY’ in this particular scrip with a target price of Rs.60.00 for Medium to Long term investment.


 Buy Neyveli Lignite Corporation Ltd For Target Rs.89.00

Neyveli Lignite Corporation Ltd operates three open cast Lignite mines of total capacity of 30.60 million tones and three power stations of capacity 2740 MW at Neyveil and one at Barsinagar.

* Neyveli Lignite has entered into Joint Venture Agreement with Rajya Vidyut Utpadan Nigam for setting up a 1980 MW coal based thermal power project in Uttar Pradesh.

* During the Second quarter ended the robust growth in the Net Profit of the company and it is rose by 20.31% to Rs. 3348.40 million.

* Neyveli Lignite Corporation has proposed to develop 2.0 MTPA Devangudi lignite Block, with an estimated cost of Rs. 358 crore.

* Neyveli has generated power during the period is 8293.65 MU against 7746.26 MU corresponding period of previous year, registering a growth of 7.07%.

* Neyveli has produced 107.65 LT of lignite against 103.18 LT produced in the corresponding period of previous year, thus registering a growth of 4.33%

* Net Sales and PAT of the company are expected to grow at a CAGR of 17% and 10% over 2011 to 2014E respectively.

Investment Highlights

Results updates- Q2 FY13,

Neyveli Lignite Corporation Ltd operates three open cast Lignite mines of total capacity of 30.60 million tones and three power stations of capacity 2740 MW at Neyveil and one at Barsinagar in India, reported its financial results for the quarter ended 30th Sep, 2012. The second quarter witnesses a healthy increase in overall sales as well as profitability of the company.

The company’s net profit jumps to Rs.3348.40 million against Rs.2783.20 million in the corresponding quarter ending of previous year, an increase of 20.31%. Revenue for the quarter increase 16.43% to Rs.13492.10 million from Rs.11588.30 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.2.00 a share during the quarter, registering 20.31% increase over previous year period. Profit before interest, depreciation and tax is Rs.5783.40 millions as against Rs.5146.80 millions in the corresponding period of the previous year.

Outlook and Conclusion

* At the current market price of Rs.79.00, the stock P/E ratio is at 8.47 x FY13E and 7.66 x FY14E respectively.

* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.9.32 and Rs.10.32 respectively.

* Net Sales and PAT of the company are expected to grow at a CAGR of 17% and 10% over 2011 to 2014E respectively.

* On the basis of EV/EBITDA, the stock trades at 4.97 x for FY13E and 4.65 x for FY14E.

* Price to Book Value of the stock is expected to be at 0.97 x and 0.86 x respectively for FY13E and FY14E.

* We expect that the company surplus scenario is likely to continue for the next years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.89.00 for Medium to Long term investment.



 Buy Shriram Transpor Finance Co.Ltd For Target Rs.702.00


Shriram Transport Finance co. Ltd is a part of Shriram Group, a prominent player in commercial vehicle financing business, chit funds, consumer finance, life insurance, general insurance, stock broking, property development, project engineering and IT.
* The company has raised the funds by the way of public issue of 60,00,000 secured Nonconvertible Debentures during the quarter.
* The company has demonstrated the results during the quarter; its boisterous growth of Net Profit is steers by 12.74% to Rs. 3375.60  million.
* The company has declared an Interim Dividend of 30% i.e. Rs. 3/- per equity share of the face value of Rs. 10/- each fully paid up. 
* As per the Court Order, the company has sanctioning the Merger is yet to be filed by Shriram Holdings (Madras) Private Limited (SHMPL) & the Company with Registrar of Companies, TamiI Nadu, the Financial affects of the merger have not been given effect to in the financial results.
* Net Sales and PAT of the company are expected to grow at a CAGR of 11% and 6% over 2011 to 2014E respectively.
 
Outlook and Conclusion
* At the current market price of Rs.615.40, the stock P/E ratio is at 9.99 x FY13E and 9.39 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.61.63 and Rs.65.55 respectively.
* Net Sales and PAT of the company are expected to grow at a CAGR of 11% and 6% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 3.21 x for FY13E and 2.96 x for FY14E.
* Price to Book Value of the stock is expected to be at 1.89 x and 1.57 x respectively for FY13E and FY14E.
The second quarter witnesses a healthy increase in overall sales as well as profitability on account of powerful combination of exciting products, an enhanced store network and robust infrastructural Support system. We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.702.00 for Medium to Long term investment.
 
Buy National Building Construction Corporation Ltd. For Target Rs.224

National Building Construction Corporation Ltd (NBCC), a public sector company, primarily provides project management consultancy services for civil construction to various state and central government ministries and departments. With an order book of INR 150 bn, 4.4x FY12 revenues providing revenue visibility over the next couple of years coupled with company’s debt-free balance sheet with a cash surplus of INR 13.25 bn provides an attractive investment opportunity. A key trigger is revenue booking of real estate projects in Okhla and Gurgaon. Other positive factors include net cash per share of INR35 and negative working capital. The company’s uniqueness in project management services to government projects, Scalable model, sustainable free cash flows, healthy return ratios and reasonable valuations provide room for further upside. Hence, we are initiating coverage on the stock with a “STRONG BUY” rating and a target price of INR 224 per share.
Investment Highlights
Unique business model with impressive financial track record-
NBCC has a unique business model & provides project management & consultancy (PMC) services (Which constitutes 91% of revenues & 76% of PBT) across civil construction segments ranging from residential complex to institutional buildings, hospitals etc. for central & state government agencies. NBCC also has a Real Estate Development segment (6% of revenues & 18% of PBT).NBCC’s strong relationship with its client & bargaining power with its sub-contractors has been the drivers of its robust cash generating business model. Also, company’s debt free status and negative working capital cycle is a clear evidence of its superior business fundamentals.
Order-backlog at 4.4x FY12 revenues provides strong visibility–
With an order backlog of INR 150bn or 4.4x FY12 revenues we see strong growth visibility for the company. Further NBCC bagged a massive INR45 bn worth PMC contract for the redevelopment work of Kidwai nagar (E) in Delhi which will pan across 86 acres entailing a total development of 12mn square feet to be executed over a period of 5 years. We believe the order will provide strong growth traction to NBCC beyond FY13e. In FY13 NBCC is likely to complete 2 real estate projects with saleable area of 2.4lac sq ft mainly comprising of a commercial complex in Okhla, Delhi. Debt free balance sheet with surplus cash, High return ratio-NBCC is a debt-free company with cash surplus of INR1325 crore. The significant cash surplus has been on account of better (negative) working capital management. The negative working capital has been on account of advances received from customers and retention margin from the subcontractor. It reported RoE and RoCE of 26% and 31% in FY12, respectively, backed by strong operating performance and asset light model.

Valuations
A PSU construction company with no debt and good cash resources on its books becomes very attractive. A good execution track record and a diverse range of projects seem to be the key to its success. With more government spending in infrastructure and with a sound order book, we have a rosy outlook for the company. It is also a good proxy for dividend play.
The strong business model is depicted in its financial performance with negative working capital cycle clubbed with the return ratios which also signify its superior business model.  Also the fact that NBCC has not relied on leverage to fund its growth reiterates our belief about the superior business model.
At the CMP of INR 168 per share, NBCC is quoting at 9.1x and 7.5x its FY13E and FY14E price earnings (P/E), respectively. We believe NBCC is better placed than most of its peers. We assign a P/E multiple of 10x and arrive at a target price of INR 224 per share which reflects 34% upside over the current stock price of INR 168 per share.


 Buy Sagar Cements


Operating Performance Below Expectations
Sagar Cements’ (SCL) 3QFY13 operating performance was below our expectations, with EBITDA at Rs53.6mn versus our estimate of Rs135.7mn, primarily due to higher cost inflation than expectations due to the rise in grid power costs coupled with non-availability of continuous power supply in Andhra Pradesh (AP) and higher other expenses. Net profit at Rs40.7mn was above our estimate, primarily driven by other operating income of Rs138mn (up 29.5% YoY). Net sales declined 13.9% YoY to Rs1.2bn (broadly in line with our estimate)
due to lower sales volume following poor demand in AP coupled with the fall in realisation. We expect cement demand to improve in the coming months, leading to a rise in cement prices and overall performance of the company. We have retained our Buy rating on the stock with a target price of Rs345.
Net sales broadly in line with estimate: SCL reported a decline in net sales by13.9% to Rs1.2bn, (in line with our estimate) due to lower sales volume following poor demand in AP coupled with the fall in realisation. Cement sales volume declined 10% YoY to 0.35mt and realisation fell 3.5% YoY to Rs3,525/tn.
Operating performance below expectations: The company posted decline in EBITDA by 82.4% to Rs53.6mn (below our estimate of Rs135.7mn) due to cost inflation (power costs, freight charges), decline in realisation and negative operating leverage. Power costs were higher due to the rise in grid power tariff. However, fuel costs declined, led by more usage of domestic coal. Freight costs increased by 7.8% to Rs679/tn due to the rise in lead distance from the plant and higher diesel prices. Other expenses increased 39.2% to Rs781/tn due to negative operating leverage. Overall expenses were up by Rs272/tn while there was decline in realisation by Rs126/tn.
Net profit above estimate led by other operating income: The company posted a net profit of Rs40.7mn, against our expectation of a net loss of Rs4mn, led by a 30% increase in other operating income to Rs139.1mn due to the AP government’s industrial policy in respect of incentives on sales tax and power consumption.
Commercial production starts at Vicat-Sagar joint venture (JV): The JV has started commercial production of cement from its recently commissioned 2.75mt plant in Karnataka. The plant is expected to operate at 50% of its capacity in the first year of its operations and tap markets in Maharashtra (60%), Karnataka (20%) and AP (20%).
Outlook: We have retained our earnings estimates for FY13, as we believe the shortfall in operating performance would be made good in 4QFY13 led by likely improvement in demand and thereby a rise in cement prices. Cement prices have already gone up to Rs230/bag from a bottom of Rs210/bag and are expected to touch ~Rs275/bag in March 2013. We believe the improvement in demand and the rise in
cement prices would improve the company’s performance in the coming quarters and the Vicat-SagarJV starting commercial operations would lead to a re-rating of its investment value. We have retained our Buy rating on SCL with a TP of Rs345.
 

 Buy Asian Paints Limited For Target Rs.4901.00

Asian Paints is India's largest paint company and Asia's third largest paint company, with a turnover of Rs. 96.32 billion.
* During the quarter, the robust growth of Net Profit is increased by 30.51% to Rs. 3352.30 million.
* The construction work at the Khandala plant near in Maharashtra is on schedule.  The first phase of 3,00,000 KL per annum is expected to be on stream in Q4-FY13.
* Asian Paints Ltd has decided to explore opportunities in areas of Home Improvement and Decor.
* For Decorative products, Material price index for Q3 was at 102.56 with 2011-12 as base 100 and for YTD Dec 2012, index was at 105.56. Material price index for Q2- FY13 was 107.71 and Q1-FY13 was 106.67.
* The company has launched the first branded home painting service under the brand name ‘Asian Paints Home Solutions’.
* Net Sales and PAT of the company are expected to grow at a CAGR of 19% and 18% over 2011 to 2014E respectively.
Investment Highlights
Results updates- Q3 FY13,
Asian Paints is India's largest paint company and Asia's third largest paint company, with a turnover of Rs 96.32 billion, reported its financial results for the quarter ended 31st Dec, 2012. Growth in the third quarter was good for decorative business across the country. The Quarter witnessed improved demand conditions during Diwali season.
The company’s net profit jumps to Rs.3352.30 million against Rs.2568.60 million in the corresponding quarter ending of previous year, an increase of 30.51%. Revenue for the quarter rose 19.23% to Rs.30529.20 million from Rs.25605.30 million, when compared with the prior year period. Reported earnings per share of the company stood at Rs.34.95 a share during the quarter, registering 30.51% increase over previous year period. Profit before interest, depreciation and tax is Rs.5413.40 millions as against Rs.4198.90 millions in the
corresponding period of the previous year.
Outlook and Conclusion
* At the current market price of Rs.4376.00, the stock P/E ratio is at 34.94 x FY13E and 30.11 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.125.23 and Rs.145.32 respectively.
*  Net Sales and PAT of the company are expected to grow at a CAGR of 19% and 18% over 2011 to 2014E respectively.
* On the basis of EV/EBITDA, the stock trades at 21.09 x for FY13E and 18.17 x for FY14E.
* Price to Book Value of the stock is expected to be at 10.49 x and 7.70 x respectively for FY13E and FY14E.
* We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.4901.00 for Medium to Long term investment. Buy Sun TV Network Ltd For Target Rs.625

We initiate coverage on Sun TV Network Ltd (Sun TV) as a BUY with a price Objective of `625 representing a potential upside of ~52.4% over a period of 24 months. At a CMP of `410, the stock is trading at 22.2x and 18.1x its estimated earnings for FY13 and FY14 respectively. With ~2 mn households in Chennai (1.3-1.5 mn cable subscribers and 0.5 mn DTH subscribers) and ~11 mn subscribers in five cities of Phase II (Bangalore, Hyderabad, Mysore, Coimbatore and Vishakhapatnam), Sun TV is expected to be one of the biggest beneficiaries of impending digitisation in these geographies. Sun TV’s revenues are expected to grow at a CAGR of 14.6% to `2,778.0 crore with cable  subscription revenues growing at a CAGR of 30.2% while DTH is expected to grow at a CAGR of 21.6% by FY15. In line with revenues, PAT is expected to grow at a 15.6% CAGR from `692.9 crore in FY12 to `1,070.6 crore by FY15.
*  Digitisation to provide fillip to Sun TV’s subscription revenues
Near term triggers from the implementation of digitisation in Phase I (Chennai) and Phase II cities should help boost Sun TV’s subscription revenues. With ~2 mn households in Chennai (~1.3-1.5 mn cable subscribers and ~0.5 mn DTH subscribers) and ~11 mn subscribers in five cities of Phase II (Bangalore, Hyderabad, Mysore, Coimbatore and Vishakhapatnam), Sun TV is well placed to benefit from the  incremental subscriber additions. We expect Sun TV to be one of the biggest beneficiaries of digitisation and revenues are expected to grow at a 3 year CAGR of 14.6% to `2,778.0 crore (cable subscription revenues – 30.2% CAGR to `360 crore; DTH – 21.6% CAGR to `598 crore) by FY15.
We believe that the cable subscription income is expected to outperform DTH revenue stream owing to increase in paying subscribers post digitisation (by 31st Dec, 2012) and increased contribution of ~`2.5 crore per month (with upside risk) from Arasu Cable network in Tamil Nadu. Given the potential for deeper penetration of DTH services in the company’s key markets, the DTH revenue is likely to continue its momentum. The sharp jump in subscription revenues from 28.2% of total sales in FY12 to 35.8% in FY15 should bring more visibility and sustainability to the revenues besides providing diversification of revenue streams.

* Valuation
We initiate coverage on Sun TV Network Ltd (Sun TV) as a BUY with a Price Objective of `625 representing a potential upside of ~52.4% over a period of 24 months. At a CMP of `410, the stock is trading at 22.2x and 18.1x its estimated earnings for FY13 & FY14 respectively. Going ahead, pick up in advertising revenues and digitisation led boost to subscription revenues bode well for the company. Historically, the stock has traded at an average of ~23x one year forward earnings and we expect Sun TV to garner similar multiples going ahead. Moreover, we believe that the sharp underperformance by Sun TV v/s ZEEL (since May, 2011) prices in the political and legal risks associated with the company. We expect the valuation gap to narrow and expect Sun TV to trade at its historical levels owing to its robust business model.