Eros International (EROINT) - Myiris.com

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
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