Eros International (EROINT) - Myiris.com

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Result Update
Rating matrix
Rating : Buy
Target : | 200
Target Period : 12 months
Potential Upside : 22%
Key Financials
| Crore FY12 FY13 FY14E FY15E
Net Sales 944 1,068.0 1,226.7 1,482.3
EBITDA 212.4 226.2 260.3 331.1
Net Profit 147.8 154.5 152.8 195.7
EPS (|) 16.1 16.8 16.6 21.3
Valuation summary
FY12 FY13 FY14E FY15E
P/E 10.2 9.7 9.8 7.7
Target P/E 12.4 11.9 12.0 9.4
EV / EBITDA 7.7 7.6 7.2 6.1
P/BV 1.8 1.5 1.3 1.2
RoNW 17.7 15.7 13.6 15.0
RoCE 16.2 15.9 15.6 16.8
Stock data
Market Capitalization
| 1502.3 Crore
Total Debt (FY13)
| 384.1 Crore
Cash and Investments (FY13)
| 172.5 Crore
EV
| 1713.9 Crore
52 week H/L 224 / 156
Equity capital
| 91.8 Crore
Face value | 10
MF Holding (%) 2.9
FII Holding (%) 9.4
Price movement
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Jun-12
Analyst’s name
Sep-12
Price (R.H.S)
Dec-12
Karan Mittal
karan.mittal@icicisecurities.com
Anil Shenoy
anil.shenoy@icicisecurities.com
Mar-13
Nifty (L.H.S)
250
200
150
100
50
0
Jun-13
WHAT’S CHANGED…
June 3, 2013
PRICE TARGET ....................................................................... Changed from | 267 to | 200
EPS (FY14E)......................................................................... Changed from | 22.3 to | 16.6
EPS (FY15E)......................................................................... Changed from | 27.2 to | 21.3
RATING...............................................................................................................Unchanged
Weak quarter as expected…
Eros International (EROINT)
| 164
Eros International reported its Q4FY13 numbers, which were in line with
our estimates. In a seasonally weak fourth quarter, Eros released movies
like Attacks of 26/11, Table No 21 and 3G, which failed to make a mark at
the box office. However, on a YoY basis, the company did better than last
year. The topline came in at | 212.3 crore (I-direct estimate - | 209.2
crore), growing 2.6% YoY. The margins expanded 307 bps YoY to 19.6%
due to lower cost of movies in this quarter. The PAT came in at | 31.8
crore against our estimate of | 28.0 crore, growing 7.0% YoY. On a full
year basis, the company reported a modest revenue and PAT growth of
13.1% and 4.5% as a couple of movies had their release pushed into
FY14 including Rajinikanth starrrer Kochadaiyaan and Go Goa Gone. Such
delays could be a possibility subsequently as well. Owing to relatively
fewer big starrer movies in FY14, we have lowered our EPS estimate for
FY14 from | 22.3 to | 16.6. We have valued the stock at 12x FY14E EPS to
arrive at a target price of | 200. We maintain our BUY recommendation
on the stock.
Delay in movies leads to moderate growth…
Eros released low budget movies like Attacks of 26/11, Table No 21 and
3G, which did not do well at the box office. However, the revenue from
sale of catalogue helped the company post modest growth in its revenue.
On a full year basis, the company did better with 13.1% revenue growth
brought about by movies like Son of Sardaar, Khiladi 786, Housefull 2,
etc. Eros had two out of top 10 movies at the box office in CY12. Going
forward, the content pipeline of the company is exciting but timely
releases of content remains a doubt. We have factored in revenue, PAT
CAGR of 17.8%, 12.6%, respectively, in FY13-15.
Valuations attractive; maintain BUY…
We believe with the emergence of multiplexes, which are still expanding
their presence; the dynamics of the film industry are changing positively.
However, due to relatively fewer big starrer movies in FY14, we have
lowered our EPS estimate for FY14 from | 22.3 to | 16.6. We maintain
BUY on the stock with a target price of | 200.
Exhibit 1: Valuation Metrics
(| Crore) Q4FY13 Q4FY13E Q4FY12 Q3FY13 QoQ (Chg %) YoY (Chg %)
Total Operating Income 212.3 209.2 206.8 369.3 -42.5 2.6
EBITDA 41.7 37.4 34.2 90.6 -54.0 21.7
EBITDA Margin (%) 19.6 17.9 16.5 24.5 -492 bps 307 bps
Depreciation 1.5 1.8 1.7 1.6 -1.3 -8.9
Interest 1.8 2.7 2.5 2.6 -31.2 -27.5
Other Income 1.6 5.2 12.8 0.8 101.3 -87.4
Reported PAT 31.8 28.0 29.7 65.2 -51.2 7.0
EPS (|) 3.5 3.0 3.2 7.1 -51.3 6.8
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research

Exhibit 2: Assumption
FY13E FY14E FY15E
Movies Released
A 4 6 7
B 7 7 8
C 7 8 9
D 12 12 14
Regional languages 47 52 54
Source: Company, ICICIdirect.com Research
Result analysis
Weak quarter; movies fail to impress…
Eros released low budget movies like Attacks of 26/11, Table No 21 and
3G, which failed to leave a mark at the box office. However, the revenue
from sale of catalogue helped the company post modest growth in its
revenue.
With movies not doing so well, the margins of the company fell sharply
on a QoQ basis but improved 307 bps on a YoY basis to 19.6% as a
relatively big budget movie failed at the box office in Q4FY12.
Exhibit 3: Margins trend
30.0
25.0
27.0
24.7
24.5
%
20.0
15.0
10.0
19.4
14.1
15.6
16.9
16.5
14.4
20.1
18.4
12.2 11.4
17.7
19.6
15.0
5.0
-
Q1FY12 Q2FY12 Q3FY12 Q4FY12 Q1FY13 Q2FY13 Q3FY13 Q4FY13
EBITDA margin
PAT margin
Source: Company, ICICIdirect.com Research
Going forward, Eros has a mixed movie pipeline with big starrer movies
like Kochadaiyaan, Happy Ending, Yeh Jawani Hai Diwani (overseas) and
Krrish 3 (overseas) along with other lower budget movies.
Exhibit 4: Movie Pipeline
Movie name
Starcast / (Director)
Ye Jawani Hai Deewani (Overseas) Ranbir Kapoor, Deepika Padukone (Ayan Mukerji)
Raanjhanaa
Dhanush, Sonam Kapoor (Anand Rai)
Warning (3D)
Santosh Barmola, Madhurima Tuli ( Anubhav Sinha)
Bajate Raho
Tushar Kapoor, Vir Das, Vinay Patak (Shashant Shah)
Kochadaiyaan (Tamil, Hindi, Telugu) Rajnikanth, Deepika Padukone (Soundarya Rajnikanth)
Rangeeley (Punjabi)
Jimmy Shergil & others
Dishkiyaaoon
Sunny Deol, 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 (Overseas)
Hrithik Roshan, Priyanka Chopra (Rakesh Roshan)
Happy Ending
Saif Ali Khan
Chalo China
Lara Dutta, Vinay Patak
Boney Kapoor (untitled) Arjun Kapoor (Okkadu remake)
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 2

Outlook & valuation
The results of the quarter were in line with our estimates in spite of the
postponement of Kochadaiyaan from Q4FY13 to Q2FY14. On a full year
basis, the company posted revenue growth of 13.1%, in spite of the delay
in Kochadaiyaan. However, such delays can be expected subsequently as
well prompting us to revise our earlier estimates of number of movies
released subsequently.
The cost of acquiring movies has been rising sharply and the
management indicated that the company would restrain from bidding
aggressively in line with its strategy of focussing on profitability. Though
this strategy would help the margins, revenue growth of the company,
until the content price corrects, would be under pressure. Also, the
company’s current line up has relatively fewer big starrer movies in FY14.
However, we continue to believe in the changing dynamics of the film
industry brought about by emergence of multiplexes. Multiplexes like
PVR have plans of aggressive expansion, which would further benefit
producers/distributors. Also, with investment in newer streams of
revenue monetisation like the online portal Erosnow and launching of two
channels with HBO would further help drive the company’s revenue.
Eros is trading at a significant discount to other media businesses and we
believe 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 | 200. 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 10.2 7.7 17.7 16.2
FY13 1068.0 13.1 16.8 4.3 9.7 7.6 15.7 15.9
FY14E 1226.7 14.9 16.6 -1.0 9.8 7.2 13.6 15.6
FY15E 1482.3 20.8 21.3 28.1 7.7 6.1 15.0 16.8
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 3

Financial summary
Profit and loss statement
(| Crore)
(Year-end March) FY12 FY13 FY14E FY15E
Total operating Income 943.9 1,068.0 1,226.7 1,482.3
Growth (%) 33.5 13.1 14.9 20.8
Operating Expenses 662.5 763.2 879.2 1,057.8
Employee Expenses 22.6 27.3 28.2 29.6
Administrative Expenses 46.4 51.2 58.9 63.7
Total Operating Expenditure 731.5 841.7 966.3 1,151.2
EBITDA 212.4 226.2 260.3 331.1
Growth (%) 36.0 6.5 15.1 27.2
Depreciation 6.0 6.5 8.4 12.3
Interest 13.4 9.2 15.0 18.1
Other Income 19.3 6.4 10.0 10.0
PBT 212.3 217.0 247.0 310.7
Total Tax 63.1 61.2 92.5 113.0
Minority Interest 1.3 1.3 1.7 2.0
PAT 147.8 154.5 152.8 195.7
Growth (%) 26.1 4.5 -1.1 28.1
EPS (|) 16.1 16.8 16.6 21.3
Source: Company, ICICIdirect.com Research
Cash flow statement
(| Crore)
(Year-end March) FY12 FY13 FY14E FY15E
Profit after Tax 147.8 154.5 152.8 195.7
Add: Depreciation 249.5 354.1 478.4 507.6
(Inc)/dec in Current Assets 321.5 26.5 -25.3 -40.6
Inc/(dec) in CL and Provisions -137.5 -20.3 37.7 61.2
Others 13.4 9.2 15.0 18.1
CF from operating activities 594.7 524.0 658.5 742.0
(Inc)/dec in Fixed Asset -583.1 -280.6 -314.4 -373.8
Others -102.4 -307.3 -469.0 -494.0
CF from investing activities -685.6 -587.9 -783.4 -867.9
Issue/(Buy back) of Equity 0.3 0.2 0.0 0.0
Inc/(dec) in loan funds 237.6 -52.2 100.0 100.0
Dividend & dividend tax - (16.1) (16.1) (16.1)
Others 2.5 4.1 -15.0 -18.1
CF from financing activities 240.5 -64.0 68.9 65.8
Net Cash flow 149.6 -127.9 -56.0 -60.1
Opening Cash 150.8 300.4 172.5 116.5
Closing Cash 300.4 172.5 116.5 56.4
Source: Company, ICICIdirect.com Research
Balance sheet
(| Crore)
(Year-end March) FY12 FY13 FY14E FY15E
Liabilities
Equity Capital 91.7 91.9 91.9 91.9
ESOP's 1.9 - - -
Reserve and Surplus 741.0 894.6 1,031.2 1,210.8
Total Shareholders funds 834.6 986.5 1,123.1 1,302.8
Total Debt 436.2 384.1 484.1 584.1
Other Non Current Liabilities 118.4 169.8 171.5 173.5
Total Liabilities 1,389.2 1,540.4 1,778.7 2,060.3
Assets
Gross Block 1,903.9 2,654.5 3,464.2 4,436.4
Less: Acc Depreciation 1,375.1 1,851.6 2,355.3 2,965.9
Net Block 528.8 802.9 1,108.9 1,470.5
Capital WIP 428.0 428.0 428.0 428.0
Total Fixed Assets 956.8 1,230.9 1,536.9 1,898.5
Investments 51.5 8.2 8.2 8.2
Inventory 7.0 9.6 11.0 13.3
Debtors 245.0 215.0 235.3 264.0
Loans and Advances 40.0 49.2 50.8 55.3
Other Current Assets 65.1 56.9 58.8 64.0
Cash 300.4 172.5 116.5 56.4
Total Current Assets 657.5 503.1 472.4 452.9
Creditors 280.7 250.2 287.4 347.2
Provisions 4.3 14.4 14.9 16.2
Total Current Liabilities 285.0 264.6 302.3 363.5
Net Current Assets 372.5 238.5 170.1 89.4
Other Non Current Assets 6.9 60.6 60.6 60.6
Deffered tax assets 1.5 2.2 2.9 3.6
Application of Funds 1,389.2 1,540.4 1,778.7 2,060.3
Source: Company, ICICIdirect.com Research
Key ratios
(Year-end March) FY12 FY13 FY14E FY15E
Per share data (|)
EPS 16.1 16.8 16.6 21.3
Cash EPS 16.8 17.5 17.6 22.7
BV 90.9 107.3 122.4 142.0
DPS 0.0 1.5 1.5 1.5
Cash Per Share 32.7 18.8 12.7 6.1
Operating Ratios (%)
EBITDA Margin 22.5 21.2 21.2 22.3
PBT / Total Operating income 22.5 20.3 20.1 21.0
PAT Margin 15.7 14.5 12.5 13.2
Inventory days 2.7 3.3 3.3 3.3
Debtor days 94.7 73.5 70.0 65.0
Creditor days 108.5 85.5 85.5 85.5
Return Ratios (%)
RoE 17.7 15.7 13.6 15.0
RoCE 16.2 15.9 15.6 16.8
RoIC 19.1 16.8 15.8 16.4
Valuation Ratios (x)
P/E 10.2 9.7 9.8 7.7
EV / EBITDA 7.7 7.6 7.2 6.1
EV / Net Sales 1.7 1.6 1.5 1.4
Market Cap / Sales 1.6 1.4 1.2 1.0
Price to Book Value 1.8 1.5 1.3 1.2
Solvency Ratios
Debt/EBITDA 2.1 1.7 1.9 1.8
Debt / Equity 0.5 0.4 0.4 0.4
Current Ratio 2.3 1.9 1.6 1.2
Quick Ratio 2.3 1.9 1.5 1.2
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 4

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 Dan, etc.
Exhibit 6: Recommendation History
300
250
200
150
100
50
0
Jun-12
Jul-12
Sep-12
Oct-12
Dec-12
Jan-13
Mar-13
Apr-13
Jun-13
Price
Target Price
Source: Reuters, ICICIdirect.com Research
Exhibit 7: Recent Releases
Date Event CMP Target Price Rating
4-Jan-13 Initiating Coverage 207 267 BUY
8-Jan-13 Q3FY13 Result Preview 209 267 BUY
15-Feb-13 Q3FY13 Result Update 192 267 BUY
8-Apr-13 Q4FY13 Result Preview 171 267 BUY
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 5

ICICIdirect.com coverage universe (Media)
CMP
M Cap
EPS (|) P/E (x) EV/EBITDA (x)
RoCE (%) RoE (%)
Sector / Company (|) TP(|) Rating (| Cr) FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E
DB Corp (DBCORP) 246 274 Buy 4,467 11.0 11.9 13.6 24.8 23.0 20.1 14.1 13.3 11.3 26.6 27.2 27.3 21.7 21.2 20.7
DISH TV (DISHTV) 66 65 Hold 7,047 -1.3 -0.6 -1.5 NM NM NM 15.9 12.8 12.2 NM NM NM NM NM NM
ENIL (ENTNET) 242 282 Buy 1,155 11.8 14.3 15.4 20.6 16.9 15.7 9.3 7.9 6.2 15.3 14.5 15.4 12.8 13.6 12.9
Eros (EROINT) 164 200 Buy 1,502 16.1 16.8 16.6 10.2 9.7 9.8 7.7 7.6 7.2 16.2 15.9 15.6 17.7 15.7 13.6
Hathway Cables (HATCAB) 276 320 Buy 4,579 -3.4 1.1 1.7 NM 251.5 NM 24.7 16.9 12.8 1.8 6.1 7.8 NM 1.9 2.9
HT Media (HTMED) 100 112 Buy 2,346 7.0 7.1 8.1 14.2 14.0 12.4 8.8 9.1 7.4 10.1 9.0 9.4 11.4 10.5 10.7
PVR (PVRLIM) 330 369 Buy 856 9.8 11.2 16.6 33.7 29.4 19.9 18.4 15.2 8.1 9.0 6.0 9.2 9.1 6.9 9.3
Sun TV (SUNTV) 423 498 Buy 19,642 17.6 17.2 21.9 24.0 24.6 19.3 11.6 11.5 8.9 35.7 32.1 36.5 26.6 23.5 26.3
ZEE Ent. (ZEETEL) 236 268 Buy 22,642 6.1 7.1 8.7 38.4 33.1 27.3 30.2 24.9 19.3 20.5 21.6 23.7 17.1 17.3 18.0
Source: Company, ICICIdirect.com Research
ICICI Securities Ltd | Retail Equity Research Page 6

RATING RATIONALE
ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns
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 pankaj.pandey@icicisecurities.com
ICICIdirect.com Research Desk,
ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
research@icicidirect.com
ANALYST CERTIFICATION
We /I, Karan Mittal MBA, Anil Shenoy MBA research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our
personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or
view(s) in this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc.
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ICICI Securities Ltd | Retail Equity Research Page 7