IDirect_ErosIntl

7/29/2019 IDirect_ErosIntl

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February 15, 2013

ICICI Securities Ltd|Retail Equity Research

Result Update

WHATS CHANGEDPRICE TARGET ....................................................................................................Unchanged

EPS (FY13E) ......................................................................... Changed from | 19.8 to | 16.6

EPS (FY14E) ........................................................................................................ Unchanged

EPS (FY15E) ........................................................................................................ Unchanged

RATING...............................................................................................................Unchanged

Tamil movies shineEros International reported its numbers, which were better than ourexpectations. The topline came in at | 369.3 crore against our estimate of| 338.7 crore, driven by theatrical revenues from movies like Thuppakki(Tamil), Maataran (Tamil), Son of Sardaar and Khiladi 786. With thisquarter, the company has reported 16.1% topline growth for 9MFY13,though in Q3FY13 the company reported a 9.6% decline. EBITDA marginsalso came in well above our estimates of 19.6% to 24.5% due to betterthan expected topline. EBITDA for the quarter stood at | 90.6 crore. PATfor the quarter declined 5.6% YoY to | 65.2 crore. On a 9M basis, PATregistered growth of 3.9%. With a better than expected quarter, wecontinue to remain bullish on the relatively de risked business model ofEros supported by growing theatrical and TV syndication revenues. Thecompany has another big starrer movie (Go Goa Gone) set to release inQ4FY13 while Kochadaiyaan the Rajinikanth starrer movie has beenpostponed to Q1FY14. We have, thus, revised our FY13 estimatesdownwards while maintaining our FY14 estimates. We have valued thestock at 12x FY14E EPS to arrive at a target price of | 267. Maintain BUY.Tamil Movies steal the showAmong Hindi movies, while Son of Sardaar performed well with a net

worldwide collection of | 108.5 crore, Khiladi 786was average with net

worldwide collection of | 77 crore. English Vinglish, made on a small

budget, collected | 67.5 crore worldwide, which was praiseworthy.

However, Tamil movies stole the show in this quarter, with Thuppakkiand

Maataranreporting domestic net box office collection of | 180 crore and

| 90 crore, respectively.

Maintain BUYFor the first time since listing, the company has declared a dividend of| 1.5/share. We believe the dynamics of the film industry are changing

positively and a re-rating of the stock is on the cards. We continue to

value the stock at 12x FY14E EPS to arrive at a target price of | 267. We

maintain BUY.Exhibit 1:Valuation Metrics(| Crore) Q3FY13 Q3FY13E Q3FY12 Q2FY13 QoQ (Chg %) YoY (Chg %)

Total Operating Income 369.3 338.7 408.4 229.3 61.1 -9.6

EBITDA 90.6 66.5 101.0 42.3 114.5 -10.3

EBITDA Margin (%) 24.5 19.6 24.7 18.4 611 bps -19 bps

Depreciation 1.6 1.7 1.5 1.7 -7.1 4.7

Interest 2.6 4.4 4.5 2.7 -5.1 -42.1

Other Income 0.8 8.0 3.2 1.8 -55.1 -74.8

Reported PAT 65.2 50.3 69.1 26.1 150.0 -5.6

EPS (|) 7.1 5.5 7.5 2.8 149.8 -5.9

Source: Company, ICICIdirect.com Research

\

Eros International (EROINT)

| 192

ting matrix

ing : Buy

get : | 267

get Period : 12 months

ential Upside : 39%

y Financials

Crore FY12 FY13E FY14E FY15E

et Sales 944 1,050.7 1,335.6 1,614.6

BITDA 212.4 224.3 309.8 378.3

et Profit 147.8 152.0 204.1 249.2

PS (|) 16.1 16.6 22.2 27.2

luation summary

FY12 FY13E FY14E FY15E

/E 11.9 11.6 8.6 7.1

arget P/E 16.6 16.1 12.0 9.8

V / EBITDA 8.9 8.8 6.3 4.9/BV 2.1 1.8 1.5 1.3

oNW 17.7 15.7 17.6 17.9

oCE 16.2 15.4 18.7 19.9

ock data

ock Data

arket Capitalization | 1762 Crore

tal Debt (FY12) | 436.2 Crore

sh and Investments (FY12) | 300.4 Crore

| 1897.9 Crore

week H/L 224 / 156

uity capital | 91.8 Crore

ce value | 10F Holding (%) 2.7

Holding (%) 7.3

ce movement

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Price (R.H.S) Nifty (L.H.S)

alysts name

aran Mittal

[email protected]

nil Shenoy

[email protected]


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ICICI Securities Ltd|Retail Equity Research Page 2

Exhibit 2:Assumption TableFY13E FY14E FY15E

Movies Released

A 5 7 8

B 6 6 7

C 7 7 8

D 12 12 14

Regional languages 50 52 54


Result analysis

Good movies in Q3FY13; solid pipeline aheadEros released a couple of big starrer movies viz. Son of Sardaar and

Khiladi 786. While Son of Sardaar did a good job with a net box office

collection of | 108.5 crore worldwide, Khiladi 786 did average business

with a worldwide net collection of | 77 crore.

However, Tamil movies stole the show in Q3FY13 with Vijay starrerThuppakki posting a domestic net box office collection of | 180 crore.

Maataranalso performed well with a domestic net box office collection of

| 90 crore.

Exhibit 3:Movies in Q3FY13Movies released Comment

English Vinglish Made on a small budget; net box office collection of | 67.5 crore worldwide

Son of Sardaar net box offcie collection of | 108.5 crore worldwide

Maataran domestic net box office collection of | 90 crore

Thuppaki domestic net box office collection of a whooping | 180 crore

Khiladi 786 Net box office collection of | 77 crore worldwide


Going forward, Eros has a strong movie pipeline with Go Goa Gone

starring Saif Ali Khan set to release in Q4FY13. Kochadaiyaan starring

Rajinikanth, which was slated for a Q4FY13 release, has been postponed

to Q1FY14. Along with Kochadaiyaan, another Rajinikanth starrer Rana,

along with movies like Sarkar 3, Krrish 3 and an untitled movie with Saif

Ali Khan would be releasing in FY14.

Exhibit 4:Movie PipelineMovie name Starcast / (Director)

Attacks of 26/11 (Ram Gopal Verma)

3G Neil Nitin Mukesh, Sonal Chauhan (Shantanu Ray, S Anand)

Warning (3D) Santosh Barmola, Madhurima Tuli ( Anubhav Sinha)

Go Goa Gone Saif Ali Khan, Kunal Khemu (Krishna DK, Raj Nidimoru)

Kochadaiyaan (Tamil, Hindi, Telugu) Rajnikanth, Deepika Padukone (Soundarya Rajnikanth)

Ye Jawani Hai Deewani Ranbir Kapoor, Deepika Padukone (Ayan Mukerji)

Dishkiyaaoon Sanjay Dutt, Haman Baweja (Sanamjit Singh Talwar)

Ram Leela Ranvir Singh, Deepika Padukone ( Sanjay Leela Bansali)

Tanu Weds Manu Season 2 R Madhavan, Kangana Ranaut ( Anand Raj)

Rambo Rajkumar Shahid Kapoor, Sonakshi Sinha (Prabhu Deva)

Singh Saab the Great Sunny Deol (Anil Sharma)

Krrish 3 Hrithik Roshan, Priyanka Chopra (Rakesh Roshan)

Untitled Saif Ali Khan

Sarkar 3 Amitabh Bachchan, Abhishek Bachchan (Ram Gopal Verma)

Rana (Tamil, Hindi Telugu) Rajnikanth (KS Ravikumar)

Bajirao Mastani (Sanjay Leela Bansali)

Tamil Untitled Rajnikanth (KV Anand)

Aankhen 2 Abhishek Bachchan (Apporva Lakhia) Source: Company, ICICIdirect.com Research


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Outlook & valuation

The numbers for the quarter were better than our expectations due to the

exceptional performance of Tamil movies. However, Kochadaiyaan a

Rajinikanth starrer Tamil movie, which was previously slated for release in

Q4FY13, has been postponed to Q1FY14. Thus, we have revised our EPS

estimate for FY13 from | 19.8 to | 16.6. We have not revised our FY14estimates though.

The management indicated that the subscription channels HBO Hits and

HBO Defined as per the deal with HBO would be launched by FY13

through a couple of DTH players. By FY14, the channels are expected to

be launched across all he DTH players with a few players from digital

cable as well.

Eros has signed a deal with Endemol wherein the company would co

produce three movies with Endemol India, which are expected to release

in FY15. Also, Endemol owns IP to popular content on television like Big

Boss, Fear Factor, etc. With Eros IP ownership of ~ 1000 movies, the deal

would provide an opportunity to monetise TV content on the big screen

and vice versa a model seen in Hollywood with movies like Transporter

and Star Trek being shown as a television series while TV shows like 24

and Sex and the Citywere made into a movie.

During the quarter, the promoters of the company had come out with an

open offer to offload 2.8% of their stake to adhere to Sebi guidelines of

minimum 25% public shareholding. At a floor price of | 200, the issue

was subscribed 4.4x.

The company declared a dividend in this quarter for the first time since its

listing in 2010. The dividend was of | 1.5/share.

We believe the dynamics of the film industry are changing positively and

a re-rating of the stock is on the cards, especially considering that it is

trading at a significant discount to other media businesses. We continue

to value the stock at 12x FY14E EPS to arrive at a target price of | 267. We

maintain BUY.Exhibit 5:Valuation

Sales Growth EPS Growth PE EV/EBITDA RoNW RoCE

(| cr) (%) (|) (%) (x) (x) (%) (%)

FY12 943.9 33.5 16.1 26.1 11.9 8.9 17.7 16.2

FY13E 1050.7 11.3 16.6 2.8 11.6 8.8 15.7 15.4

FY14E 1335.6 27.1 22.2 34.3 8.6 6.3 17.6 18.7

FY15E 1614.6 20.9 27.2 22.1 7.1 4.9 17.9 19.9 Source: Company, ICICIdirect.com Research


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Financial summary

Profit and loss statement

(| Crore)

(Year-end March) FY12 FY13E FY14E FY15E

Total operating Income 943.9 1,050.7 1,335.6 1,614.6

Growth (%) 33.5 11.3 27.1 20.9

Operating Expenses 662.5 749.6 921.6 1,120.0

Employee Expenses 22.6 24.2 30.7 35.5

Administrative Expenses 46.4 52.5 73.5 80.7

Total Operating Expenditure 731.5 826.3 1,025.8 1,236.2

EBITDA 212.4 224.3 309.8 378.3

Growth (%) 36.0 5.6 38.1 22.1

Depreciation 6.0 6.8 9.7 12.6

Interest 13.4 10.7 13.5 13.5

Other Income 19.3 10.0 10.0 10.0

PBT 212.3 216.9 296.6 362.2

Total Tax 63.1 64.2 92.5 113.0

Minority Interest 1.3 0.7 - -PAT 147.8 152.0 204.1 249.2

Growth (%) 26.1 2.8 34.3 22.1

EPS (|) 16.1 16.6 22.2 27.2 Source: Company, ICICIdirect.com Research

Cash flow statement

(| Crore)


Profit after Tax 147.8 152.0 204.1 249.2

Add: Depreciation 249.5 354.4 398.7 490.5

(Inc)/dec in Current Assets 321.5 -40.4 -107.8 -105.5

Inc/(dec) in CL and Provisions -137.5 32.2 86.0 84.2

Others 13.4 10.7 13.5 13.5

CF from operating activities 594.7 509.0 594.6 731.9

(Inc)/dec in Fixed Asset -583.1 -216.1 -136.5 -135.6

Others -102.4 -347.7 -389.7 -478.6

CF from investing activities -685.6 -563.8 -526.2 -614.2

Issue/(Buy back) of Equity 0.3 0.0 0.0 0.0

Inc/(dec) in loan funds 237.6 0.0 0.0 0.0

Dividend & dividend tax - (16.1) (16.1) (16.1)

Others 2.5 -10.7 -13.5 -13.5

CF from financing activities 240.5 -26.8 -29.6 -29.6Net Cash flow 149.6 -81.6 38.7 88.1

Opening Cash 150.8 300.4 218.7 257.4

Closing Cash 300.4 218.7 257.4 345.5 Source: Company, ICICIdirect.com Research

Balance sheet

(| Crore)


Liabilities

Equity Capital 91.7 91.7 91.7 91.7

ESOP's 1.9 1.9 1.9 1.9Reserve and Surplus 741.0 876.9 1,064.9 1,297.9

Total Shareholders funds 834.6 970.5 1,158.5 1,391.6

Total Debt 436.2 436.2 436.2 436.2

Other Non Current Liabilities 118.4 119.1 119.1 119.1

Total Liabilities 1,389.2 1,525.8 1,713.8 1,946.9

Assets

Gross Block 1,903.9 2,509.1 3,257.7 4,182.3

Less: Acc Depreciation 1,375.1 1,770.9 2,392.7 3,194.3

Net Block 528.8 738.2 865.0 987.9

Capital WIP 428.0 428.0 428.0 428.0

Total Fixed Assets 956.8 1,166.2 1,293.0 1,415.9

Investments 51.5 51.5 51.5 51.5Inventory 7.0 7.8 9.9 12.0

Debtors 245.0 272.7 346.6 419.0

Loans and Advances 40.0 44.6 56.7 68.5

Other Current Assets 65.1 72.5 92.1 111.3

Cash 300.4 218.7 257.4 345.5

Total Current Assets 657.5 616.3 762.8 956.4

Creditors 280.7 312.4 397.2 480.1

Provisions 4.3 4.8 6.0 7.3

Total Current Liabilities 285.0 317.2 403.2 487.4

Net Current Assets 372.5 299.1 359.6 469.0

Other Non Current Assets 6.9 6.9 6.9 6.9

Deffered tax assets 1.5 2.2 2.9 3.6

Application of Funds 1,389.2 1,525.8 1,713.8 1,946.9 Source: Company, ICICIdirect.com Research

Key ratios


Per share data (|)

EPS 16.1 16.6 22.2 27.2

Cash EPS 16.8 17.3 23.3 28.5

BV 90.9 105.8 126.2 151.6DPS 0.0 1.5 1.5 1.5

Cash Per Share 32.7 23.8 28.1 37.6

Operating Ratios (%)

EBITDA Margin 22.5 21.4 23.2 23.4

PBT / Total Operating income 22.5 20.6 22.2 22.4

PAT Margin 15.7 14.5 15.3 15.4

Inventory days 2.7 2.7 2.7 2.7

Debtor days 94.7 94.7 94.7 94.7

Creditor days 108.5 108.5 108.5 108.5

Return Ratios (%)

RoE 17.7 15.7 17.6 17.9

RoCE 16.2 15.4 18.7 19.9

RoIC 19.1 16.8 20.7 23.0Valuation Ratios (x)

P/E 11.9 11.6 8.6 7.1

EV / EBITDA 8.9 8.8 6.3 4.9

EV / Net Sales 2.0 1.9 1.5 1.1

Market Cap / Sales 1.9 1.7 1.3 1.1

Price to Book Value 2.1 1.8 1.5 1.3

Solvency Ratios

Debt/EBITDA 2.1 1.9 1.4 1.2

Debt / Equity 0.5 0.4 0.4 0.3

Current Ratio 2.3 1.9 1.9 2.0

Quick Ratio 2.3 1.9 1.9 1.9 Source: Company, ICICIdirect.com Research


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Company Description

Eros International Media Ltd is a leading company in the Indian film

entertainment industry that acquires, co-produces and distributes Indian

language films in multiple formats. The company was incorporated in

1994 and listed in 2010.

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. Some of

the big starrer movies to which Eros has the rights include Ra.One,

Housefull, Housefull 2, Ready, Rockstar, Golmaal 3, Om Shanti Om, Hey

Babyy, Love Aaj Kal, De Dana Danetc.

Exhibit 6:Recommendation History

0

50

100

150

200

250

300

Feb-13Jan-13Nov-12Oct-12Aug-12Jul-12May-12Apr-12Feb-12

Price Target Price

Source: Reuters, ICICIdirect.com Research

Exhibit 7:Recent ReleasesDate Event CMP Target Price Rating

4-Jan-13 Initiating Coverage 207 267 BUY

8-Jan-13 Q3FY13 Result Preview 209 267 BUY Source: Company, ICICIdirect.com Research


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ICICIdirect.com coverage universe (Media companies)

CMP M Cap

(|) TP(|) Rating (| Cr) FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E

DB Corp (DBCORP) 239 274 Buy 4,339 11.0 11.5 14.1 24.9 23.9 19.5 14.2 13.3 10.6 26.6 26.0 29.3 21.7 20.0 20.9

DISH TV (DISHTV) 68 80 Buy 7,196 -1.3 -0.8 -0.5 NM NM NM 16.2 13.7 10.1 NM NM NM NM NM NM

ENIL (ENTNET) 235 266 Buy 1,118 11.8 12.7 14.3 19.9 18.4 16.4 8.9 7.9 6.1 15.3 13.8 14.9 12.8 12.2 12.0Eros (EROINT) 192 267 Buy 1,762 16.1 16.6 22.2 11.9 11.6 8.6 8.9 8.8 6.3 16.2 15.4 18.7 17.7 15.7 17.6

Hathway Cables (HATCAB) 237 295 Buy 4,211 -3.4 -1.9 0.7 NM NM NM 21.4 15.3 11.4 1.8 3.5 6.7 NM NM 1.3

HT Media (HTMED) 102 128 Buy 2,398 7.0 7.4 9.4 14.5 13.7 10.9 9.0 8.4 6.4 10.1 9.4 10.9 11.4 10.9 12.1

Jagran Prakashan (JAGPRA) 103 131 Buy 4,147 5.6 7.9 7.3 18.2 12.9 14.0 11.0 10.0 7.8 23.1 22.2 27.3 23.7 29.4 24.7

PVR (PVRLIM) 260 261 Hold 673 9.8 7.5 14.5 26.5 34.6 17.9 15.0 8.7 5.0 9.0 4.8 8.9 9.1 4.7 8.4

Sun TV (SUNTV) 443 498 Buy 19,617 17.6 17.3 21.7 25.2 25.6 20.5 12.1 11.7 9.6 35.7 34.0 37.0 26.6 24.2 26.6

ZEE Ent. (ZEETEL) 227 268 Buy 21,721 6.1 7.4 8.7 36.9 30.5 26.0 29.0 22.8 18.3 20.5 22.4 23.7 17.1 17.9 18.0

RoCE (%) RoE (%)

Sector / Company

EPS (|) P/E (x) EV/EBITDA (x)



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ICICI Securities Ltd Retail Equity Research Page 7

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ratings to its stocks according to their notional target price vs. current market price and then categorises them

as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional

target price is defined as the analysts' valuation for a stock.

Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;

Buy: >10%/15% for large caps/midcaps, respectively;

Hold: Up to +/-10%;

Sell: -10% or more;

Pankaj Pandey Head Research [email protected] Research Desk,ICICI Securities Limited,1st Floor, Akruti Trade Centre,Road No 7, MIDC,Andheri (East)

Mumbai 400 [email protected] CERTIFICATION

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