CMP: Rs. 162.55; Buy at
current levels.
Medium to Long term Target – Rs. 180; STOP LOSS – Rs. 149.55; Market Cap: Rs. 1,491.84 Cr; 52 Week
High/Low: Rs. 276.95 / Rs. 153.00
Total Shares: 9,17,77,720 shares;
Promoters : 7,14,07,000 shares –77.80 %; Total Public holding : 2,03,70,720
shares – 22.20 %; Book Value: Rs. 72.99; Face
Value: Rs. 10.00; EPS: Rs. 13.74; Div: NIL % ; P/E: 11.91 times; Ind P/E:
29.33; EV/EBITDA: 8.76.
Total Debt: Rs. 354.20 Cr; Enterprise Value: Rs. 1,846.04 Cr.
EROS INTERNATIONAL MEDIA: EROS INTERNATIONAL MEDIA was
incorporated as in 1977 and is based in Mumbai, India. 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 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 compared with PVR
Ltd, Prime Focus ltd, Tips Industries Ltd.
Investment Rationale:
Eros International Media Ltd is a leading global company in the Indian
filmed entertainment industry that acquires co-produces and distributes Indian language
films in multiple formats.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 movie viewing.
Eros International Media Ltd has announced the launch of
its online music channel Eros Now Music on YouTube. Eros has leveraged its wide reach and the subscriber base
of its YouTube presence to launch a new channel Eros Now Music for established
and emerging artists. Eros Now Music will feature established as well as
emerging talent including Shaan, DJ Sheizwood, UK based pop artist Kimeli,
Shweta Yogendra, Farhan Saeed, Gajendra, Simmy and Tippy, Rahul / Shah Rule
among others. The content on the newly launched channel will include music
videos and special behind the scenes footage. Eros International collaborates
with Anurag Kashyap Films Pvt Ltd & Sikhya Entertainment to present Peddlers
in the International Critics' Week, Cannes 2012. EIML has been honored with a
Certificate of Excellence at the recently held Annual Inc. India Awards. EIML released 23 films
during Q1FY13 in different languages; 5 Hindi, 18 Tamil & other regional language
films. EIML recently signed a licensing agreement with colors’ Viacom18 Media
Pvt. Ltd. EIML has been honored with a Certificate of Excellence at the recently
held Annual Inc. India Awards. Eros International Media Ltd has released 23
films during Q1FY13 in different languages (19 films in Q1 FY12); 5 Hindi, 18
Tamil & other regional language films. The company has written a story of
growth and positive start for Q2 FY13 with the successful release of “Cocktail” in July 2012, which has done a net box
office collection of Rs. 100 crore worldwide. Eros International announces satellite television licensing deal
with COLORS' Viacom18 Eros
International Media Ltd has signed a licensing agreement with COLORS’ Viacom18
Media Pvt. Ltd for new and forthcoming releases and library films to be shown exclusively
on Viacom18's COLORS channel in India.
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. The company reported net profit of Rs. 31.41 Cr as against Rs. 21.66 Cr in the last quarter, the revenue last quarter was Rs. 2,570.30 Cr, the company posted an tremendous growth of 44.44 % in EPS which stood at Rs. 3.42/sh in the last quarter. At the current market price of Rs. 162.55, the stock P/E ratio is at 8.37 x FY13E
and 7.16 x FY14E respectively. Earning per share (EPS) of the company for the
earnings for FY13E and FY14E is seen at Rs. 19.40 and Rs. 22.69 respectively. Net
Sales and PAT of the company are expected to grow at a CAGR of 25 % and 21 % over
2011 to 2014E respectively. On the basis of EV/EBITDA, the stock trades at 5.33 x for FY13E and 4.57 x for FY14E. Price to Book Value of the stock is expected
to be at 1.52 x and 1.26 x respectively for FY13E and FY14E. It is expected that the
company's surplus scenario is likely to continue for the next three years, will
keep its growth story in the coming quarters also. One can ‘BUY’ in this particular scrip with a target
price of Rs. 180.00
for Medium to Long term investment.
| KEY FINANCIALS | FY11 | FY12 | FY13E | FY14E |
|---|---|---|---|---|
| SALES (Rs. Crs) | 706.97 | 943.88 | 1,170.41 | 1,388.69 |
| NET PROFIT (Rs. Crs) | 117.23 | 147.84 | 178.04 | 208.25 |
| EPS (Rs.) | 12.82 | 16.12 | 19.40 | 22.69 |
| PE (x) | 13.05 | 10.38 | 8.62 | 7.37 |
| P/BV (x) | 2.29 | 1.84 | 1.52 | 1.26 |
| EV/EBITDA (x) | 9.26 | 6.62 | 5.49 | 4.71 |
| ROE (%) | 17.67 | 17.87 | 17.73 | 17.19 |
| ROCE (%) | 19.47 | 18.70 | 19.47 | 19.58 |
I would buy EROS INTERNATIONAL MEDIA LTD with a price target of Rs. 180 for the medium to long term target. As I always say, I am a long
term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or Rs. 149.55 on your every purchase.
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