>DLF LIMITED (AMBIT CAPITAL)

Optimism Overplayed; maintain 'Sell'

The recent rally in DLF's stock price suggests that markets are factoring in a 'V' shaped recovery. However, we expect the recovery to be 'U' shaped, given the weak margins in affordable housing and the continued slowdown in commercial and retail demand; this will maintain pressure on NAV. We maintain 'Sell' on DLF with a revised TP of Rs157 (earlier Rs 80), a 56% downside from current levels.

Mkts pricing in 45% rise in property price-unsustainable
As per our sensitivity analysis, DLF's CMP (Rs354) is factoring in a 45% rise in property prices in FY10E, which, in our view is unsustainable. Our recent visits to Delhi and Bangalore suggest that the buyer continues to be price conscious due to fear of job losses.

Higher sales not to be margin accretive
Focus on affordable housing is likely to generate higher sales for DLF,but compress its EBITDA margins, from 55% in FY09 to 36 in FY10E. Moreover, with a price conscious buyer at one end and an oversupply situation on the other, DLF would find it extremely difficult to increase prices.

Sensitivity analysis to property price.
Our sensitivity analysis indicates that if property prices were to be increased by 50%, the NAV is 378. If the prices were to be increased by 100%, the NAV would rise to Rs 600. If we assume a price rise in FY12 and FY13 of 30% each, then the NAV would stand at Rs258.

Two-pronged strategy - maintain sales & lower debt
To ensure sales, DLF is pricing its residential projects lower than the existing prices in the vicinity. This strategy has already ensured success for DLF in Delhi and Bangalore. DLF is also selling its non-core assets and land to lower debt.

Valuation
We maintain 'Sell' on DLF with new TP of Rs 157 (earlier Rs80) that is based on 1x NAV. Our NAV factors in teh expected sale of non-core assets/land and reduction in debtor. We have also lowered the discount to NAV to nil due to the aggressive steps taken by DLF to improve its balance sheet. Currently, the stock trades at 42x FY10E earnings and 41x FY11E earnings

To see full report: DLF LIMITED

>Sun TV (AMBIT CAPITAL)

We recently met with the Sun TV management, following are the key takeaways

• Q4FY09 revenue growth estimated at 24% YoY
• No impact of slowdown on advertisement revenues
• DTH segment and increasing addressability to bolster revenue growth
• Revenues from analogue cable segment to grow at 4-5% annually
  

Topline to reach Rs103.8bn in FY09 According to the management, Sun TV's Q4FY09 revenues are expected to grow at 24% YoY to Rs30.6bn. In line with this growth, the company's revenues for FY09 are estimated to touch Rs103.8bn, an upside of 19.3% over FY08. View on advertisement revenues

• Sun TV claimed that it has not yet witnessed any slowdown in its advertisement revenues

• The company indicated that its advertisement slots were booked two months in advance Sun TV believes that if the overall ad revenues for the industry drops, the company will also suffer from lower growth in ad revenues. Nevertheless, according to the management, the company's ad revenues would continue to grow, albeit at a slower pace, but not turn negative in the near term.

• A key positive for the company is that more than 50% its ad revenues come from the FMCG sector that is expected to grow at 10-12% per annum over the next two years.

• Sun TV faces high regional concentration risk as it derives more than 50% of its ad revenues from Tamil Nadu. This remains a key concern.

Radio business Sun TV expects its radio business to breakeven in FY11; losses for FY10 are estimated to stand at Rs600mn.

Movie Segment For FY10, Sun TV's movie budget is estimated to be in the Rs700-800mn range for 9-10 small and medium budget movies. In addition, the company is also planning a big budget movie (amounting to Rs700mn) during FY10.

To see full report: SUN TV