CMP:
Rs. 134.25; Buy at Rs. 130 - Rs. 135 levels. Short term Target - Rs. 150.00.
Medium to Long term Target – Rs. 175.00; STOP LOSS – Rs. 123.51; Market Cap: Rs. 1,233.76 Cr; 52 Week High/Low: Rs. 230.05 / Rs. 106.75
Medium to Long term Target – Rs. 175.00; STOP LOSS – Rs. 123.51; Market Cap: Rs. 1,233.76 Cr; 52 Week High/Low: Rs. 230.05 / Rs. 106.75
Total Shares:
9,19,21,340 shares; Promoters : 7,14,07,000 shares –77.80 %; Total Public
holding : 2,03,70,720 shares – 22.20 %; Book
Value: Rs. 84.43; Face Value: Rs. 10.00; EPS: Rs. 10.93; Dividend: NIL % ; P/E: 12.33 times; Ind P/E: 30.64; EV/EBITDA: 6.92.
Total
Debt: 384.08 Cr; Enterprise Value: Rs. 1,564.81 Cr.
EROS
INTERNATIONAL MEDIA LTD:
EROS INTERNATIONAL MEDIA LTD 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 VOD, DTH, 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. It
distributes content through retail outlets and it’s Website under the Eros and
Ayngaran labels. EROSMEDIA 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.
Investment
Rationale:
EIML is a leading global company in the
Indian filmed entertainment industry that acquires co-produces and distributes
Indian language films in multiple formats. Eros continues its emphasis on non-theatrical revenue
streams. Eros launched two advertising free TV channels HBO DEFINED and HBO
HITS along with HBO during the quarter. These channels are currently available
on DISH and AIRTEL digital platforms and will available with other operators
soon. Online entertainment portal, EROS NOW, is expected to pick up going ahead
as broadband connectivity improves in India and 3G, 4G networks become more entrenched.
In August, 2013 Eros announced that it is partnering with A.R. Rahman to
produce a movie with the music legend. This movie can create quite a buzz and
garner decent pre-release revenues due to the “Rahman” tag attached to it. The Company has strong
distribution capabilities which enable them to target a majority of the 1.2
billion people in India, primary market for Hindi language films. The company
has distribution offices in Mumbai, Delhi, Punjab, Mysore and Chennai. The
group has a distribution network that spans over 50 countries, with offices in
India, UK, USA, Dubai, Australia, Fiji, Isle of Man and Singapore. The company
also holds license of airborne rights to certain airlines for in-flight
viewing. EIML announced the launch of its online music channel Eros Now Music
on YouTube. HBO Defined and HBO Hits have a subscriber base of nearly 1,50,000
currently. These channels have monthly subscription price of Rs. 140 for HD
and Rs. 100 for SD. Currently they are being offered at 50% discount. Management
expects revenues of Rs. 150 Cr from the channels by FY16E. Eros International reported
better-than-expected Q1FY14 numbers. The topline stood at Rs. 186.3 cr while the
EBTIDA was at Rs. 39.5 cr. However, the company reported a 27.5% and 23.6% YoY
decline in its operating income and EBITDA, respectively, since Q1FY13 was marked
by higher number of hit movies. The company released movies like Raanjhanaa, Yeh
Jawaani Hai Deewani (only overseas), which had a decent run at the box office.
Higher other income of Rs. 7.9 crore aided PAT, which stood at Rs. 29.3 cr. The
stock has plummeted in the past few months due to a relatively weaker movie
slate in Q1FY14. Nonetheless, the company has several big banner movies like Ram
Leela, Kochadaiyaan and Krrish 3 (overseas) scheduled for release in the next
six months.
Outlook and
Valuation:
The recent KPMG report anticipates the
market size of Indian Music & Entertainment sector to touch Rs 1,45,700 Cr
(US$ 25.51 billion) by 2016. 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.
Also, with investment in newer streams of revenue monetisation like the online portal
Eros Now and launching of two channels with HBO would further help drive the
company’s revenue. The Q2FY14 is expected to be weak due to lack of any major
releases. Revenues could get biased more towards Q3FY14 as this is seasonally
strong quarter. Also, major releases such as “Kochadiayan”, “Krrissh3”, “Ram
Leela” and others are expected to get released in Q3FY14. At the current market price of Rs. 134.25, the stock P/E ratio is at 8.03 x FY13E and 6.10 x FY14E respectively. Earning per share (EPS) of the company for the FY14E is seen at Rs. 19.40 and for FY15E could be Rs. 22.69 respectively. 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’ with a target price of Rs. 175.00
for Medium to Long term investment and for the Shorter term it would be Rs. 150.
KEY FINANCIALS | FY12 | FY13E | FY14E | FY15E |
---|---|---|---|---|
SALES (₹ Crs) | 944.00 | 1,068.00 | 1,167.80 | 1,473.10 |
NET PROFIT (₹ Cr) | 147.80 | 154.50 | 153.40 | 201.80 |
EPS (₹) | 16.10 | 16.80 | 16.70 | 22.00 |
PE (x) | 7.60 | 7.30 | 7.40 | 5.60 |
P/BV (x) | 1.40 | 1.10 | 1.00 | 0.90 |
EV/EBITDA (x) | 6.00 | 5.90 | 6.50 | 5.30 |
ROE (%) | 17.70 | 15.70 | 13.70 | 15.40 |
ROCE (%) | 16.20 | 15.90 | 13.40 | 15.30 |
VIEW THE POWER POINT PRESENTATION ON
Nice analysis. Keep it up.
ReplyDeleteGreat Analysis Bhavikbhai.
ReplyDeleteRegards
Equity and Commodity Advisor
Hello Reader Friends,
ReplyDeleteAn Update on EROS -
Eros International Media Ltd's online unit ErosNow has signed a pact with UTV & Viacom18 to add their Bollywood blockbusters to the content on its subscription services. ErosNow has added some of the UTV's Titles such as Rowdy Rathore,Barfi!, RangDeBasanti,Jodha Akbar and 50 other titles from Viacom18 Catalogue to its library. ErosNow offers movies,music videos and audio tracks on demand and movies comes under ErosNow Premium Segment while rest of them are offered for free....
Regards
Bhavikk shah
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