Here’s why Citi Research is upbeat on Sun TV

People look at a screen displaying India's Finance Minister Arun Jaitley presenting the budget, on a facade of the Bombay Stock Exchange (BSE) building in Mumbai, India, February 29, 2016. The government unveiled a budget for the poor on Monday, announcing new rural aid schemes and skimping on a bank bailout, in a strategy shift that seeks to boost Prime Minister Narendra Modi's ruling party in coming state elections. REUTERS/Danish Siddiqui - RTS8IIY

Sun TV witnessed positive movement on the Sensex, with the stock surging over 1 percent intraday on Friday.

Citi Research has a buy call on the stock with a target price of Rs 850. The research firm believes that Sun’s valuation discount to Zee has narrowed over the past year. “There is more than the big legal overhang subsiding post the acquittal of the promoters in the Aircel-Maxis case in February; depending on business performance, we think the discount could narrow further,” it said in a report.

“This, coupled with a significant subscription opportunity, and a swing in IPL, imply better growth going forward.”

Simultaneously, improvement in Telugu ratings and dominance in the Tamil market will bode well for the advertising revenues. “With a leadership position in Tamil and now Telugu, we expect Sun's underperformance vs. industry growth to change as ad volumes
pick up post the demonetization hit from 1QFY18,” it said in its report.

Moreover, it finds strategic changes such as increased commission programming, lowering dependence on movies, weekend fiction shows, HD channel conversions, among others as encouraging.