|SALES (₹ Crs)||1,068.00||1,135.00||1,344.00||1,490.00|
|NET PROFIT (₹ Cr)||154.00||200.00||223.00||253.00|
Wednesday, July 23, 2014
CMP: Rs. 228.90; Buy at current levels.
Medium to Long term Target – Rs. 265; STOP LOSS – Rs. 210.00; Market Cap: Rs. 2,105.26 Cr; 52 Week High/Low: Rs. 243.80 / Rs. 106.75
Total Shares: 9,19,73,190 shares; Promoters : 6,88,33,290 shares –74.84 %; Total Public holding : 2,31,39,900 shares – 25.16 %; Book Value: Rs. 96.59; Face Value: Rs. 10.00; EPS: Rs. 12.34; Dividend: 15.00 % ; P/E: 18.54 times; Ind P/E: 34.02; EV/EBITDA: 7.63.
Total Debt: 384.08 Cr; Enterprise Value: Rs. 2,326.53 Cr.
EROS INTERNATIONAL MEDIA: EROS INTERNATIONAL MEDIA was incorporated as in 1977 and is based in Mumbai, India. It was started by Mr. Arjan Lulla. It was earlier known as Rishima International Private Ltd and changed its name to Eros Multimedia Private Limited on July 25, 2000. Company again changed its name to Eros International Media Private Ltd on Nov 20, 2008, On Nov 18, 2009 company again changed its name to the present Eros International Media Ltd. It is subsidiary of Eros Worldwide FZ Llc. Eros International Media Limited operates in the media and entertainment sector in India and internationally. It engages in sourcing content through acquisition, co-production, or production; the theatrical distribution network operation; licensing films for cable, satellite, and terrestrial television; and the distribution of Tamil film content in Western Europe through its own television station. The company came out with an IPO of about 2 Cr shares in September 2010 at Rs. 175 totaling to Rs. 350 Crs at the price of Rs. 175 and got listed at Rs. 213.35 on 6 Oct 2010. The purpose of the issue was to acquire and co-produce Indian films. The company also distributes content through physical formats, such as DVD, VCD, and Blu-rays, as well as the digital mediums comprising Video On Demand, Direct To Home, Internet, mobile, and in-flight entertainment; and involved in music publishing and distribution activities. In addition, it provides production planning and visual effects services for films; engages in the acquisition, production, and distribution of Tamil films worldwide; and involved in cable or DTH licensing, as well as trading and exporting international film rights. The company owns approximately 1,100 films comprising Hindi, Tamil, and other regional languages & has aggregated rights to over 1,900 films plus additional 700 films for which the company holds digital rights only. In the year 2006, Eros International Plc, the holding company of the Eros Group, became the first Indian company to list on the Alternative Investment Market (AIM) of the London Stock Exchange. On November 13, 2013, Eros International got listed on New York Stock Exchange at $11.10 a share, post NYSE listing, the company has cancelled its shares from Alternative Investment Market (AIM) london. Eros International PLC, is the Ultimate Holding Company based at Isle of Man, Eros Worldwide FZ-LLC is the holding company based in UAE and the subsidiaries include - Eros International Films Pvt Ltd, Copsale Ltd, Big Screen Entertainment Pvt Ltd, EyeQube Studios Pvt Ltd, EM Publishing Pvt Ltd, Eros Animation Pvt Ltd, Eros Digital Pvt ltd, Eros International Ltd (UK), Digicine PTE Ltd, Ayngaran International Ltd (Isle of Man). It distributes content through retail outlets and it’s Website under the Eros and Ayngaran labels. Eros International Media can be locally compared with PVR Ltd, Prime Focus ltd, Reliance Broadcast Network Ltd, Balaji Telefilms ltd, Media Matrix Worldwide Ltd, Shree Ashtavinayak Cine Vision Ltd, Tips Industries Ltd and globally compared with Walt Disney Co of US California, Time Warner Inc of USA, IG Port Incorporated of Japan, Twenty First Century Fox, Inc of New York, Lions Gate Entertainment Corp of California, UTV Media PLC of UK, Dreamworks Animation Skg Inc of California.
EROS INTERNATIONAL MEDIA LTD is a leading global company in the Indian films and entertainment industry. It acquires co-produces and distributes Indian language films in multiple formats. Eros continues its emphasis on non-theatrical revenue streams. Eros has two advertising free TV channels HBO Defined and HBO Hits along with HBO, these channels are doing pretty well. These channels are currently available on most of the DTH operators. The Online entertainment portal-EROS NOW is expected to pick up going ahead, as the broadband connectivity in India improves with 3G/4G networks becoming more affordable. In August, 2013 Eros announced that it is partnering with A.R. Rahman to produce a movie with the music legend. The company continues to get its movie selection right, and which is evident from its presence in five out of top 10 box office releases in the year gone by. Movies such as "Goliyon Ki Rasleela-Ram Leela, Jai Ho, R…Rajkumar, Grand Masti, One Nenokkadine (Telugu), Raanjhanaa, Singh Saab the Great, Krrish 3 (Overseas), Yeh Jawaani Hai Deewani (Overseas)" turned out to be the good bets for the company. In addition, Eros also enjoys a competitive advantage in terms of a strong international presence owing to its parent company EROS PLC. Eros, for high budget movies, generally recovers whole production cost even before theatrical release in the form of sale of music and satellite rights and 39 % guaranteed cost recovery from its parent for international distribution. In addition, monetisation of its huge movie library will over pay TV, innovative box office performance linked satellite rights and preview over premium TV (HBO Defined and HBO Hits) will further reduce its dependence on theatrical revenues, which currently stand at 40 %. It is expected that its revenues from TV licensing can grow at 14 % CAGR in FY14-16 to reach Rs. 352.7 crore in FY16E. The company is expanding its regional presence with a number of releases in the Telugu, Tamil and other regional markets. The year for EROS ended with about 32 regional films, which currently accounts for about 20-25 % of its revenues. The company expects the same to reach about 30-35 % of revenues. India has varying entertainment tax rates across the states, and this impacts the EBITDA margins of EROS. With the implementation of GST would immensely reduce entertainment tax, which in turn helps EBITDA margins to grow by 1 % to 2 %. The listing of the parent company in the international markets will help Eros with necessary capital inflow and will also help it to increase its investments in good quality content. In addition, the good grasp of its parent in the international markets helps Eros to command a relative advantage in the international distribution space. Parent company’s top management downplayed the street concerns about significant changes in respect of terms for sharing overseas films rights on deal renewal in October 2014. Under the current deal, Parent Company i.e. Eros International Plc will pay 39 % of film cost for overseas rights to Eros International Media Ltd. It is believed that the clarity from Parent Company will remove major overhang on the stock. Here, Eros de-risk its business by pre-selling the overseas right to overseas entities that have significant presence. Through this, Eros has generally been able to recover nearly 40 % of its cost of acquisitionof a film, thus, significantly reducing the risk associated with a film's offtake as well as ensuring cash flows. The company also recovers 35 % to 40 % of its costs by selling movie rights to channels such as Colors, Zee TV and Star Plus. Together, with such strategies helps to reduce the risk inherent in the film production and distribution business. Thus, Eros has been able to gain from multiple revenue streams and limit the losses quite significantly in case movies do not perform well in theatre screens. Eros also gains from satellite, After the telecom regulator mandated digitising cable networks in metros and top cities, DTH players and digital cable companies have been able to substantially increase the number of subscribers to their networks. This has led to growth in subscription revenues for satellite channels. It is also increasingly helping them broadcast new movies soon after after their release.
Outlook and Valuation:
Eros is a leading producer/distributor and has one of the largest film libraries of over 1200 films. Eros International has exhibited strong growth in the number of movie releases by releasing 77 movies in FY13 and 69 in FY14 across Hindi, Tamil/Telugu and other languages. The company continues to get its movie selection right, evident from its presence in five out of top 10 box office releases in the year gone by. The recent FICCI-KPMG report anticipates the market size of Indian Film Indusrty is set to grow at a compounded annual rate of 11.5 % from 2013 to touch Rs. 19,330 Cr by 2017. But the television industry is set to grow at a much faster pace of 18 % over the same period and touch Rs. 84,760 Cr by 2014. Players such as EROS would benefit from this trend as they increasingly look to tap the small screen for monetising films. There is increased penetration in Indian markets, which is expected to even intensify further, owing to a revolution brought in by digital technology. Wireless broadband, growing internet usage, cable digitisation and higher DTH adoption would further drive Indian M&E industry. The report also noted that smart phones, tablets, gaming devices have laid the foundation of a new wave in the industry. Eros co-produces 60% of the movies while the rest are either acquired or produced. The company has had long industry associations, a consistent track record of releasing three to four movies of the top 10 movies in the box office and a wide distribution network. Eros has been able to develop strong relationships with key figures in the Indian film industry, which help it secure key films and build a strong portfolio of movies. The results were slightly better than the market expectations even though the number of movies released was much lower. The cost of acquiring movies has been rising sharply and the management indicated that the company would refrain from bidding aggressively in line with its strategy of focusing on profitability. This strategy would help margins, revenue growth of the company, until the content price corrects, would be under pressure. The company has a good movie pipeline for the next two years. Multiplexes like PVR have plans of aggressive expansion, which would further benefit producers/distributors. The Catalogue monetization led positive surprise at both revenue and margin front for EROS. Its Revenue grew by 17 % YoY to Rs. 433 crore in Q3 FY14. This positive surprise at revenue front was led due to huge spurt in catalogue monetization which increased by around 75 % YoY to Rs. 60 crore in Q3 FY14. Revenue from other main streams such as theatrical rights were Rs. 170 crore which is 39 % of revenue and satellite rights of Rs.110 crore which is 25 % of revenue in Q3 FY14. The EBITDA margin of EROS improved by 6.79 % QoQ to 31.3 % in 3Q FY14 which is significantly better. Higher than expected EBITDA margin was primarily led by catalogue monetization as minimum expenditure is incurred for earning the same and hence top-line directly flows to bottom-line. Movies lined-up for FY15E looks promising. The company is planning to release in FY15E eight movies of category “A” of which 4 will be in Hindi and 4 in regional languages such as Tamil & Telugu. Big movies lined up for release in H1 FY15E such as Happy Ending starring Saif Ali, Action Jackson starring Ajay Devgan and Sonakshi Sinha and already released Kochadaiyaan starring mega star Rajnikanth, Deepika Padukone and music composed by A R Rehman. The management expects EBITDA margin to be around 25 % in FY14E and FY15E as compared to historical average of 22 %, this will be supported by revenue flow from catalogue monetization which has relatively higher margin as compared to other revenue streams. The company’s net debt at the end of Q3 FY14 stood at Rs. 280 crore which is more or less at the same level in Q3 FY13. Also with the tie-up with Tata Sky in December 2013, Eros has covered around 80 % of 80 million DTH homes. The company is witnessing significant traction for HBO premium channels and expect momentum to pick up further once it starts marketing services aggressively. The production cost during 9M FY14 stood at Rs. 600 crore and for FY14E is likely to be in the range of Rs. 750 crore to Rs. 800 crore. In FY15E, production cost will be in the range of Rs. 800 crore to Rs. 900 crore. It is believed that with the strong movie slate lined-up for release in FY15E will support the mid-teen growth rate in the coming year. Further, clarity from Parent Company in respect of terms for sharing overseas films rights on agreement renewal will remove major overhang on the stock. The content pipeline of the company is exciting but timely release of content remains a doubt. It is expected that the company’s surplus scenario is likely to continue for the next three years keeping its growth story in the coming quarters also. Eros is trading at a significant discount to other media businesses. Factoring in revenue and PAT CAGR of 17.4 % and 14.3 %, respectively, in FY13-15, Eros could be a good buy at a Current Market Price of Rs. 228.90 and at this price, stock is trading at a P/E of 9.45x FY15E and 8.32x FY16E. The company can post EPS of Rs. 24.20 for FY15E and Rs. 27.50 for FY16E. One can buy EROS INTERNATIONAL MEDIA LIMITED with a target price of Rs. 265.00 for Medium to Long term investment.
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Sunday, July 13, 2014
CMP: Rs. 59.00; Buy at Rs. 56 to 59 and at every dips.
Short Term Target: Rs. 65.00; Medium to Long Term Target: Rs. 75.00; STOP LOSS – Rs. 50.00; Market Cap: Rs. 176.87 Cr; 52 Week High/Low: Rs. 65.20 / Rs. 22.50.
Total Shares: 3,00,04,850 shares; Promoters : 1,81,14,663 shares – 60.37 %; Total Public holding : 1,89,90,187 shares – 39.62 %; Book Value: Rs. 28.98; Face Value: Rs. 2.00; EPS: Rs. 3.83; Dividend: 25.00 %; P/E: 15.39 times; Ind. P/E: 85.41; EV/EBITDA: 7.73.
Total Debt: 1 Lakh; Enterprise Value: Rs. 176.82 Cr.
D-LINK INDIA LTD: D-Link India Ltd was founded in the year 2008 and is based in Mumbai. D-Link (India) Limited was formerly known as Smartlink Network Systems Limited. Company is a subsidiary of D-Link Holding Mauritius Inc. D-Link (India) Limited engages in the marketing and distribution of networking products in India and SAARC countries. It primarily offers digital home, easy portal, home servers, security box, Internet protocol (IP) device integration and wireless routers, as well as carrier switches, broadband digital subscriber lines (DSL) and DSL access multiplexers, integrated access devices, cable modems, voice over IP, passive optical network, rural connective platform outdoor wireless bridges, digital home appliances, network storage, and IP surveillance and multimedia devices for customers and service providers. The company also provides metro network, access network, premises network and home entertainment focusing on the provision of backend infrastructure services to customers at various levels, such as service distribution, aggregation, and access and premise networks. The company sells its networking products to distributors, original equipment manufacturers and system integrators, as well as for the enterprise and small and medium business segments in the government, hospitability and education sectors. It also exports its products. D-LINK INDIA LTD can be locally compared Salora International Limited, Computech Intl. Ltd, Redington India Ltd, Vintron Informatics Ltd, Zenith Computers Ltd, Encore Software Ltd and globally with Emulex Corp of USA, Emcore Corp of USA, Digi International Inc of USA, Cisco Systems Inc of USA, Intel Corporation of USA, Qualcomm Inc of USA, United Technologies Corp of USA, Netgear Inc of USA, Novatel Wireless Inc of USA, Netas Telekomunikasyon A.S. of Turkey, Transmode AB of Sweden, Pace Plc of London, Alpha Networks Inc of Taiwan, Hitachi Kokusai Electric Inc of South Korea, Humax Co, Ltd of South Korea, Wave Electronics Co, Ltd of South Korea, Wistron NeWeb Corporation of Taiwan, Ceragon Networks Ltd of Isreal, Inter Far East Engineering Public Company Limited of Thailand, Marco Holdings Berhad of Malaysia, Startia Inc of Japan, Gremz, Inc of Japan, Aiko Corporation of Japan.
D-Link India is the business of marketing and distribution of networking, broadband, digital, voice, and data communications products of its parent D-Link Corporation, Taiwan in India. D-Link Corporation, Taiwan is globally renowned for its networking products and solutions and has a presence in 67 countries with a wide range of products. D-Link India distributes switches, routers, modems, voice over Internet protocol products, surveillance equipment, print servers, Ethernet cards, and broadband equipment. India is expected to witness a data boom similar to the voice boom in 2008. The total number of internet connections is expected to reach 46.3 Cr by FY18E, as per the FICCI KPMG report. The national optic fibre network as proposed by the new government will facilitate the New Telecom Policy (NTP 2012) which targets 60 Cr broadband users by 2020. Currently, we have about 5.5 Cr fixed and mobile broadband users. D-Link has a vast product portfolio, with such a product portfolio of active products such as switches, wireless & digital home products, passive products such as copper and fibre products and certain IT and enterprise based solutions and modems and routers, D-Link is expected to emerge as the direct beneficiary of the internet revolution. With more and more people availing internet connections, the increase in popularity and usage of mobile devices like laptops, smart-phones and gaming consoles has also resulted in an increased demand for networking products in the consumer space. India adds more than 1.50 Cr wireless subscribers every month and is the second-largest market after China for wireless services. The numbers of wireless subscribers has increased from 26 crore at the end of FY08 to 90 crore at the end of FY14, a CAGR of 23 % while wired broadband penetration has increased from 0.4 crore at the end of FY08 to 1.5 crore at the end of FY14, at a CAGR of 25 %. In addition to these there are currently 4.6 crore users accessing broadband internet through mobile devices such as smart-phones and dongles. The robust growth in wireless as well as broadband subscribers is pushing the demand for PCs, tablets, smart phones and consequently, pushing the demands for networking, especially, Wi-Fi networking products such as wireless routers, dongles, wi-fi adopters. The emergence of an affluent middle class is triggering the demand for mobile and internet segments. A young and growing population is aiding this trend, especially the demand for smart phones. This will fuel an increase in 3G/4G subscribers and broadband users, thus, creating further demand for networking products from individual users. Enterprises have been investing towards setting up a strong networking infrastructure that can deliver reliable and efficient end-to-end solutions to aid in their business operations. The roll out of 3G services and the significant government initiatives in aggressively promoting broadband usage in the country are driving the demand of networking products like routers, switches and access points to storage and surveillance products across all verticals. The fast growth in networking infrastructure is evident across a string of verticals such as telecom, retail, aviation, hospitality, government, manufacturing and education which are increasingly deploying sophisticated networking infrastructure. D-Link being a market leader in providing networking and IT products and solutions naturally benefits from any increased spending in networking infrastructure. During this budget of 2014-15, the Finance Minister of India allocated Rs. 100 Crs fund to set up virtual classrooms, and Rs. 500 Cr for National Rural Internet and Technology Mission, which include providing broadband and information Technology (IT) skills to villages. There is a direct c0-relation between increasing broadband & mobile penetration and GDPof a country. According to a study by Deloitte LLP & Cisco, a 10 % increase in mobile penetration increases total factor productivity in the long run by 4.2 %. The Government has also proposed to integrating all the services of central government departments and ministries on its e-Biz platform, aimed at making all business and investment related clearances and compliances available on single website with an integrated payment gateway by 31 Dec 2014. And D-Link has sustained its growth momentum in various categories. In the switches segment, D-Link’s market share continues to grow and has reached the leadership position at nearly 37 % in FY13 against the backdrop of a virtually flat market. In the routers segment, D-Link ranks second with a 31 % market share in FY13. In the wireless domain, D-Link retained its Numero Uno position with 40 % of the market while in the emerging domain of IP surveillance, D-Link was at 4th position in FY13. Historically, whenever the cycle turns up, it is always the leaders who benefits foremost from the growth trajectory. And, D-Link by virtue of its leadership position is fitted in the best placed to benefit from this. The new government aims to set up a National Optic Fibre network up to the village level and also establish Wi-Fi in public zones. D-Link is very well placed to zero in on the upcoming internet boom in India with its portfolio of innovative product offerings. The total broadband subscribers in India have grown at a stellar rate of 58 % CAGR in FY10-14 to 5.5 Cr from a mere 9o lakh in FY10. This growth in broadband subscribers is also visible in D-Link’s financials. Nonetheless, the scope for further growth remains humongous as broadband penetration is still quite low. Going ahead, if the current momentum continues, the industry would reach closer to NTP 2012’s target of 60 Cr broadband subscribers, which would directly benefit players like D-Link.
Outlook and Valuation:
D-Link (India) Limited is a part of D-Link Corporation and is one of the largest networking company in India. The Company is engaged in Marketing and Distribution of Networking products in India and SAARC Countries. D-Link Holding Mauritius Inc., which is 100 % subsidiary of D-Link Corporation, is holding 60.37 % in D-Link (India) Ltd. Today, D-Link (India) Limited is a key market player with a nationwide reach, robust product portfolio and a provider of the superior services in India. The Company is firmly committed towards delivering high quality, efficiency and reliability to Networking products, solutions and services. The management has expressed confidence that the networking industry will continue to grow at a robust pace on the back of higher enterprise spending, further roll out of 3G/4G networks and increasing broadband penetration will also help. With strong parental support from D-Link Taiwan, in terms of a pipeline of the latest and innovative products, D-Link India is ideally placed to take advantage of the impending boom in networking and internet products. D-Link is a market leader in important product categories such as Switches where it holds 37 % market share; in Wireless it holds 40 % market share; and in Routers it holds 31 % market share. Recently, in Union Budget of 2014-15, the Finance Minister proposed to build smart cities, increasing high-speed Internet connectivity, providing online delivery services through integration of government departments and also the long standing issue of inverted duty for electronic goods has been addressed & Special additional duty of 4 % is removed and educational cess put on imported electronic products will encourage domestic manufacturing. India is among the world's youngest nations with a median age of 26 years. 65 % of Indian population is estimated to be below 35 years of age and India will have 7 Cr new entrants to its work force over the next 5 years. India currently has about 21.4 Cr internet users, the third largest in the world and is likely to have 33 Cr to 37 Cr internet users in 2015 which would then be the second largest in terms of incremental growth. Due to declining costs of Internet access and mobile devices, nearly 55 % of aggregate user base in 2015 is expected to have an access to the internet from a mobile or tablet device in India. Economic contribution from Internet in India can be potentially doubled from current 1.6 % of India’s GDP to 2.8 % to 3.3 % by 2015. Internet-related economy is expected to grow bigger than education and as bigger as healthcare sector in terms of current GDP share. Internet’s effect on the Indian economy goes well beyond iGDP. The Current levels of internet-related expenditure are estimated to create about 60 lakhs direct and indirect jobs. As the direct impact of the internet on India’s GDP has the potential to treble by 2015, an additional 1.6 Cr jobs could be created. In India, Enterprise IT spending is expected to grow at a CAGR of 12 % and reach $50 billion by the end of CY15 from $38 billion in CY13. With the spending on IT on the rise, networking products and services will continue to be in great demand in the foreseeable future. Wireless subscribers have grown at a CAGR of 23 % while wired broadband penetration has increased at a CAGR of 25 % through FY08-14. The emergence of an affluent middle class is triggering demand for the mobile and internet segments This will fuel an increase in 3G/4G subscribers and broadband users, thus, creating further demand for networking products from individual users. D-Link has a strong backing from its parent company and D-Link India enjoys flexibility when it comes to procurement and pricing and can manage its working capital cycle better than other companies in difficult times. For the last 3 years, D-Link has maintained a debtor day’s cycle that is in the range of 70 to 85 days and it has a creditor day’s cycle in the range of 70 to 90 days. As per the management, the company receives a credit period of 45 days from its parent company which can be flexible depending on the working cycle requirement and 60 days from its local supplier. It will continue to maintain an inventory of products for two months. D-Link India along with its parent entity D-Link Holding Mauritius is acquiring TeamF1 Networks, a company which specializes in providing networking and security software for embedded devices. The acquisition, which is aimed at 100% shareholding in the TeamF1 Networks, will be partially funded through stock swap and partially through cash. Accordingly, D-Link India has issued 55 lakh shares on a preferential basis to the promoters and other shareholders of TeamF1 Networks. Post the demerger; the company had reported flat revenues in FY09-11. However, D-Link India’s performance has been quite impressive over the past two years as it posted 47.6 % and 40.5 % CAGR in its revenue and EBITDA, respectively, over FY12-14. D-Link distributes its products in India largely through two pan-India distributors, Redington and Ingram Micro. The company has of a strong distribution network with 17 branch offices in India, 22 RMA centres, 85 business distributors and over 200 SI partners. It has further enhanced its distribution network by adding one other distributor (Cadence) in FY14. D-Link continually engages with its channel partners through various training and technology up-gradation programmes to ensure that they are better equipped to meet customer needs relating to technology. D-Link sales have grown at a CAGR of nearly 56 % during the period FY11 to FY14 on the back of aggressive marketing strategies. At a Current Market Price of Rs. 59.00, the D-Link stock is trading at a P/E of 9.21x FY15E and 7.65x FY16E. The company can post EPS of Rs. 6.40 for FY15E and Rs. 7.70 for FY16E. One can buy D-LINK LIMITED with a target price of Rs. 65.00 for Short term and for Medium to Long term investment it should be Rs. 75.00.
|SALES (₹ Crs)||353.70||486.00||586.40||671.00|
|NET PROFIT (₹ Cr)||12.30||13.60||19.20||23.00|
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