Eros International Media Ltd - Q3FY14 Result Update - ICICI Direct

Eros International reported better-than-expected Q3FY14 numbers. The topline stood at Rs. 432.7 crore (I-direct expectation: Rs. 343.4 crore), with the EBITDA nearly double our estimates at Rs. 135.6 crore. Revenues were chiefly aided by the success of its movies such as Ramleela, Krrish 3 and some other regional releases as this was a seasonally strong quarter. There was a 679 bps YoY EBTIDA margin expansion due to film slate cost being lower and also higher operating leverage. PAT was at Rs. 92.0 crore vs. expectation of Rs. 43.5crore. The company has two major releases, Jai Ho and One (Telugu film starring Mahesh Babu) in the coming quarter and a star-studded movie pipeline ahead. We have valued Eros at 7x FY15E EPS of Rs. 26.4 and maintain BUY with a revised TP of Rs. 185.

Beats expectations, EBITDA improvement of 679 bps YoY

Eros released around 41 movies in 9MFY14 (vs. 60 in 9MFY13) including 15 Hindi, 25 Tamil and one other language movie. The success of big budget movies such as Ramleela, Krrish 3 (overseas) led to ~679 bps YoY EBITDA margin expansion to 31.3%. The newly launched channels HBO Defined and HBO Hits continue to receive an encouraging response and are on air via Airtel, Dish TV and Tata Sky's DTH network as also on cable platforms of Hathway and GTPL. The company also launched the premium offering of Eros Now during the quarter and plans to monetise the service.

Several high profile releases in pipeline

Going forward, the content pipeline of the company is exciting with movies such as Kochadaiyaan, Happy Ending, Action Jackson, etc. due for release in FY15. We have factored in a revenue and PAT CAGR of 17.7% and 25.2%, respectively, in FY13-15E.

Valuations attractive; maintain BUY...

Increasing number of overseas movie rights helps Eros reduce its dependence on the domestic box office performance. The company is trading at a significant discount to other media businesses. We maintain BUY with at target price of Rs. 185 (7x FY15E EPS).

Shares of EROS INTERNATIONAL MEDIA LTD. was last trading in BSE at Rs.161.2 as compared to the previous close of Rs. 148.55. The total number of shares traded during the day was 264950 in over 5497 trades.

The stock hit an intraday high of Rs. 166 and intraday low of 149.3. The net turnover during the day was Rs. 42599363.

Source : Equity Bulls

Keywords