Hold Balaji Telefilms - Centurm

Disappointing result

Balaji Telefilms posted disappointing Q3FY12 results with revenues declining 12% YoY and operating loss increasing on the back of continuing lower programming hours both in commissioned and sponsored category along with flat realisations. We believe the sale of education and mobile businesses and increased traction of the movies division are positive signs. We maintain Hold rating on the stock.

In-line with expectations: Balaji Telefilms posted 12% decline in revenues on the back of lower programming hours. Operating loss too increased to Rs15mn from Rs4mn while PAT was at Rs11mn in-line with expectations on the back of high other income. A realisation for commissioned programming was flat at Rs2mn/hour and for sponsored programming Rs0.33mn/hour.

Lower programming hours continue to hurt: Commissioned programming hours declined from 162 hours to 120 hours during the quarter following the closure of programmes. However, sequentially the hours remained flat. In the quarter 'Pyaar Ki Yeah Ek Kahaani' went off air from Star One but the company is launching 'Kya Hua Tera Wada' on Sony TV in January 2012. In regional commissioned programming the company currently has 3 programmes with one in Bhojpuri and two in Marathi languages. Programming hours in Sponsored category fell from 187 hours to 94.5 hours during the quarter with 3 programmes on air currently and 1 to be launched soon.

Other developments: During the quarter the company sold its mobile and education divisions for Rs83mn while retaining the internet division. This division posted a loss of Rs3.4mn during the quarter. The company also sold its Mira Road land during the quarter for Rs510mn and made a profit of Rs12.3mn. In the movies division, the company released 'Dirty Pictures' during the quarter which garnered more than Rs850mn in box office collection. Also 'Ragini MMS' and 'Shor in the City' were released during FY12 along with a Marathi movie. The company has got a strong pipeline of movies with 'Kya Super Kool Hai Hum' and 'Lootera' in the production stage.

Maintain Hold: We continue to believe that the company needs to increase its programming hours to recover its fixed expenses. It needs a minimum of 5 commissioned programmes to maintain breakeven along with stable regional and sponsored programmes hours which is currently at all time low. The sale of its education and mobile business is a positive as they were burning significant cash while the movies business is gaining traction and hence we increase our target price from Rs34 to rs36 but maintain our Hold rating on the stock.

Source : Equity Bulls

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