EROS INTERNATIONAL MEDIA: Shaping the future of Indian Entertainment !!!

Scrip Code: 533261 / EROSMEDIA

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.

READ HERE TO KNOW MORE ON LONG TERM INVESTING - CLICK HERE

ZEE ENTERTAINMENT ENTERPRISE LTD:A Business at inflection point !!!

Scrip Code: 505537 / ZEEL

CMP:  Rs. 149.80; Buy at current levels .
Short term Target: Rs. 160; STOP LOSS – Rs. 137.81; Market Cap: Rs. 14,290.28 Cr; 52 Week High/Low: Rs. 152.00 / Rs. 105.55

Total Shares: 95,39,57,720 shares; Promoters : 41,84,72,440 shares –43.87 %; Total Public holding : 53,54,85,280 shares – 56.13 %; Book Value: Rs. 31.39; Face Value: Rs. 1.00; EPS: Rs. 6.44; Div: 150 % ; P/E: 23.25 times; Ind. P/E: 23.26; EV/EBITDA: 16.48

Total Debt: Rs. 1.90 Cr; Enterprise Value: Rs. 31,424.32 Cr.

ZEE ENTERTAINMENT ENTERPRISES LTD: Zee Entertainment Ltd was founded in the year 1982, based in Mumbai. Company was formerly known as Zee Telefilms Limited and changed its name to Zee Entertainment Enterprises Limited in January 2007. ZEEL, together with its subsidiaries, operates as a vertically integrated media and entertainment company in India. It operates in three segments: Broadcasting and Content, Education, and Film Production. The Broadcasting and Content segment develops, produces, and procures television programming and film content, and delivers through satellites, cable, and Internet. It broadcasts channels, such as Hindi general entertainment channels and regional language general entertainment channels, Bollywood channels, sports channels, English entertainment channels, alternate lifestyle channels. Company earns revenues by the way of advertisement and subscription revenues and syndication. The Education segment engages in distribution of software learning products; and provides education and training in information technology. The Film Production segment produces and distributes films. The company has a library housing approximately 1,00,000 hours from 80,000 hours of television content; and rights to approximately 3,000 movie titles. Effective March 29, 2010, Zee News Ltd. demerged its Regional General Entertainment Channel Business Undertaking and transferred its operation to Zee Entertainment Enterprises Limited It has operations in India, the United States, Canada, Europe, Africa, the Middle East, Southeast Asia, Australia, and New Zealand. ZEEL can be compared with Sun Tv Network Ltd, Network 18 Media & Investment Ltd and Television Broadcasts Limited.

Investment Rationale:

The management has not provided any guidance for growth in advertising revenues for the coming year, on account of poor industry environment. On subscription revenues, the company has guided for a low double digit growth on account of further gains from Mediapro. Content expenses of the company are likely to rise in the coming quarters, on higher costs of content and higher selling and distribution expenses on new channels and its marketing spending. The company had earlier guided for a loss of Rs. 65 Cr – Rs. 75 Cr in sports, and further investments of Rs. 50 Cr to Rs. 100 Cr on investments in new channels/ content. Zee Entertainment shall see a fairly strong growth in advertising revenues against the industry if the current trends in ratings are to be sustained. The company has launched new programs  in new formats, and so the company shall outperform media peers in advertising revenue growth in the coming year. ZEE’s JV named Mediapro has clearly created benefits for Zee Entertainment in excess of market expectation. And so the growth of 13 % in the domestic subscription revenues in FY13 along with the 10 % growth in expenses is factored in. And so, the result of these changes can been seen on PAT estimate & is believed that the company's improving competitive position, especially in the Hindi GEC space will have significant positive effect. The strong performance of Zee TV implies that Zee Entertainment revenues could move counter to the industry in the coming year, which is a significant positive.

Outlook and Valuation:

ZEE has launched a couple of new initiatives that include Ditto TV – it’s over the top platform, and channels Ten HD and Ten Golf. Till yet, the company's media initiatives have largely been in niches rather than mainline channels. The company has noted that the advertising revenues for the quarter were weaker in last year largely due to sports properties. The subscription revenues have shown a strong growth. On the above it is noted that the subscription revenues have been impacted positively by changing accounting methods for Mediapro which was from equity accounting to proportionate consolidation which added about Rs. 50.60 Crs to domestic subscription revenues for 9 months of this year, secondly, the same affected cost items- resulting in significant margin compression for the quarter, and lastly, the changes in treatment of forex items leaded to strong growth in items below EBITDA line, affecting PAT positively (relative to EBITDA). ZEE is investing in international businesses, which could accelerate overseas revenues over the long term. Even though the loss in sports division has often been considered a bane for ZEE, sports channels and HD will aid ARPU growth for ZEE over the longer term.  There is a huge under‐declared subscriber base of about 7.5 Cr (likely to come under its ambit post digitisation and MediaPro (a Joint Venture with Star) which will entail humungous potential for ZEE. Zee TV’s viewership rating is near its one‐year high, which makes ZEE well positioned for the fresh ad deals - ZEE TV has crossed the 250 Gross Rating Points (100 GRP means either that 100 % of targeted households are reached once per week or 1 % of them are reached 100 times in the week or any combination thereof, also called homes per rating points) mark after more than 1.5 years to strengthen its place as the No.2 behind Star Plus. This development has mainly come from a good performance of fiction shows. The full- year results are a better indicator of the performance of the company and so the company could show best performance at the PAT level as well as at the top-line. The subscription revenue growth & ad revenue growth which amounts to 20%-25% to its total revenues could be a key positive surprise on full year basis, and key negative for the year could be decline in selling, growth in other expenses. The Sports business losses has always been a headache for the company due to higher expenses on account of rupee depreciation, and partly on account of launches of new channels -Ten Golf and Ten HD. On the results, management has indicated that the company has, ex-sports, seen a positive growth in advertising revenues. ZEE reported 20.6 % rise in net profit for the quarter ended June 30,2012 at Rs. 157 Cr on back of strong advertising and subscription revenues. Advertising revenues for April - June rose 18 % to Rs. 447.2 Cr, while subscription revenue were at Rs. 364.2 Cr (Rs. 250.5 Cr from domestic & Rs. 113.7 Cr internationally) were up 19 % year on year. The company's consolidated operating revenue for June 2012 quarter also witnessed a 21 % increased at Rs. 843 Cr YoY while consolidated operating profit grew 50 % to Rs. 233.2 Cr. EBITDA & Net Profit margin stood at 27.7 % and 18.6 % respectively. During this quarter, ZEE TV averaged 215 GRPs recording a relatively share of 21.2 % among the top five hindi General Entertainment Channels & now No.2 GEC in terms of rating, also its market share in the prime time band improved significantly wherein ZEE TV averaged 122 GRPs recording a relative share of 23.1 %. At the current market price of Rs. 149.80, the stock is trading at 21.09 x FY13E and 14.98 x FY14E respectively. Earnings per share (EPS) of the company for FY13E and FY14E are seen at Rs. 7.10 and Rs. 10.00 respectively. With sturdy free cash flow generation of about Rs.1,000 Cr with minimal debt, it is expected that the company will keep its secular growth story intact with stable dividend policy will make ZEE the best stock to own in defensive space. One could BUY ZEE ENTERTAINMENT ENTERPRISES LTD with a target price of Rs. 200 for Medium to Long term investment and for the SHORT TERM PLAYERS it should be Rs. 160.00 

KEY FINANCIALS	FY11	FY12	FY13E	FY14E
SALES (Rs. Crs)	3,008.80	3,040.50	3,276.60	3,656.90
NET PROFIT (Rs. Crs)	605.50	590.60	632.90	751.60
EPS (Rs.)	6.30	6.10	7.10	10.00
PE (x)	21.50	23.50	22.00	18.60
P/BV (x)	3.90	3.60	3.10	2.90
EV/EBITDA (x)	14.80	17.20	14.40	11.60
ROE (%)	17.50	18.10	17.30	18.10
ROCE (%)	18.10	18.40	17.20	17.50

I would buy ZEE ENTERTAINMENT ENTERPRISE LTD with a price target of Rs. 160 for the short term and Rs. 200 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. 137.81 on every purchase. 

READ HERE TO KNOW MORE ON LONG TERM INVESTING - CLICK HERE

ZEE Entertainment Enterprises Ltd : Offering growth opportunities !!

Umeed Se Saaje Jindagi

Scrip Code: 505537 / ZEEL
CMP:  Rs. 134.00; Buy at Rs. 120 - 126.00 levels; Short term Target: Rs. 150, 6 Month target – Rs. 200 ; STOP LOSS - Rs.110; Market Cap: Rs. 13,107.11 cr. 

52 Week High/Low: Rs. 164.33 / Rs. 105.80
Total Shares: 97,81,42,930 shares; Promoters : 41,84,72,440 shares –42.79 %; Total Public holding : 55,96,03,690 shares –57.21 %; Book Value: Rs. 29.69; Face Value: Rs. 1.00; EPS: Rs. 5.92; Div: 200 % ; P/E: 27.11 times; Ind P/E: 21.27; EV/EBITDA: 20.48

Total Debt: Rs. 268.01 cr; Enterprise Value: Rs. 29,409.98 cr

ZEE Entertainment Ltd was founded in the year 1982, based in Mumbai. Company was formerly known as Zee Teleflims Limited and changed its name to Zee Entertainment Enterprises Limited in January 2007. ZEEL, together with its subsidiaries, operates as a vertically integrated media and entertainment company in India. It operates in three segments: Broadcasting and Content, Education, and Film Production. The Broadcasting and Content segment develops, produces, and procures television programming and film content, and delivers through satellites, cable, and Internet. It broadcasts channels, such as Hindi general entertainment channels and regional language general entertainment channels, Bollywood channels, sports channels, English entertainment channels, alternate lifestyle channels. Company earns revenues by the way of advertisement and subscription revenues and syndication The Education segment engages in distribution of software learning products; and provides education and training in information technology. The Film Production segment produces and distributes films. The company has a library housing approximately 80,000 hours of television content; and rights to approximately 3,000 movie titles. Effective March 29, 2010, Zee News Ltd. demerged its Regional General Entertainment Channel Business Undertaking and transferred its operation to Zee Entertainment Enterprises Limited It has operations in India, the United States, Canada, Europe, Africa, the Middle East, Southeast Asia, Australia, and New Zealand.

Investment Rationale:

Zee - Turner signed a distribution JV with Star-Den which will be a game-changer, as it will significantly increase the bargaining power with local cable operators. Company’s subscriptions will be strong after this JV with Star Den which will also set up a Media Pro Enterprise India which will be 50:50 partnerships between Zee Turner and Star Den Media Services, for combined distribution of TV channels. ZEE and Star networks together controls 40 % - 45 % of viewer ship share.  The JV will be effective from July 2011 and the subscription revenue would be visible from FY13. It is expected that a 17 % Y-o-Y growth will be seen in analog subscription revenue for ZEE in FY13 as against an estimated 5 % growth in FY12. Recently on 19th June 2011, Zee unveiled its new brand identity by a new logo & a new slogan with the objective of taking forward of progressive outlook for the channel. Zee Entertainment Enterprises (ZEEL) announced a share buyback programme that will have a cash outflow of up to Rs. 700 cr. The buyback would be of its fully paid-up equity shares of face value Re.1.00 each, at a price not exceeding Rs. 126.00 per equity share. ZEEL proposes to buyback a minimum of 1.26 crore shares. The Maximum Buyback Size is within the company law limit of 25% of the aggregate of the Company’s paid-up equity capital and free reserves as on March 31, 2010. The aggregate paid up equity share capital and free reserves of the Company as at March 31, 2010 was Rs. 2,818.33 Cr. The date of opening of Buyback offer is July 27, 2011 and will end at March 23, 2012.

Concerns regarding margin pressure:

Margins are likely to be under pressure, it is believed that there could be a pressure on core business margins, as volumes will slowdown coinciding with the ramp-up in original programming hours. Original Programming Hours for the flagship channel like Zee TV has increased from 24 hours per week to 29.5 hours per week and the management targets to increase original programming hour further to 33-35 hours per week by March 2012.  On the contrary, Star Plus is currently running at original programming hours of 40 hours per week while Colors is at 30-31 hours per week.

Outlook & Valuation:

Though there are visible signs of slowdown in ad growth likely due to macro slowdown and a pause in ad spends after the spending of Rs.1,500 cr on cricket season (ICC Cricket World Cup + Indian Premier League). While there is no indication of a cut in ad-budgets as yet, advertisers have turned more cautious, thus impacting advertising volumes. A buy back & 11 % ad revenue growth in FY12 and 12 % growth in FY13 makes a buy in ZEEL with a target price of Rs. 150 The stock trades at 20x FY12E EPS of Rs. 6.70 and 16.5x FY13E EPS of Rs. 8.2 with a price target of Rs. 150 (18x FY13E EPS). I believe that buy back will be EPS accretive by 1.288 %. 

Result Update:

Zee Entertainment Enterprises Ltd (ZEEL) posted 13.28 % decline in its consolidated net profit at Rs. 130.16 Cr for the first quarter ended June 30, 2011. In the same quarter of the previous fiscal, the company’s net profit was Rs. 150.10 Cr. For the three months ended June 30, 2011, the company’s consolidated sales increased 3.14 per cent to Rs 698.30 crore compared with Rs. 676.99 crore in the same quarter of 2010—11. The company’s advertising revenues increased 0.5 % during the quarter to Rs. 378.74 crore (Rs 376.91 crore). As said earlier, with the onset of festival season, the company is expecting to see normalcy in advertising spends. ZEEL’s subscription revenues increased 16.7 % during the first quarter of the current financial year to Rs. 305.09 Cr v/s Rs. 261.42 Cr in the same quarter last fiscal. Zee final Dividend of 200 % i.e Rs. 2.00 on 28th July 2011, AGM on 10th Aug 2011. Book Closure from 30th July 2011 to 5th Aug 2011  

KEY FINANCIALS	FY10	FY11E	FY12E	FY13E
SALES (Rs. crs)	2,196.60	2,941.40	3,238.20	3,674.30
NET PROFIT (Rs. crs)	468.60	570.00	660.20	803.10
EPS (Rs.)	5.20	5.80	6.70	8.20
PE (x)	25.80	23.20	20.00	16.50
P/BV (x)	3.50	3.10	2.80	2.60
EV/EBITDA (x)	21.00	17.10	14.30	12.00
RONW (%)	13.00	13.80	14.40	16.20
ROCE (%)	17.80	19.50	21.2	23.80

I maintain my buy status on ZEE Entertainment Enterprises Ltd with the price target of Rs. 150 in short term. For long term my target is of Rs. 200. As I always say do respect the market and keep a strict stop loss of 8 % or Rs. 110 on your every purchases.