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November 18, 2014
Index
Stock Update >> Eros International Media
Stock Update >> Pratibha Industries
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investor’s eye
stock update
Eros International Media
Reco: Hold
Stock Update
Impressive show, price target revised to Rs360
Key points
Company details
Price target:
Rs360
Market cap:
Rs3,030 cr
52 week high/low:
Rs328/136
NSE volume:
(no. of shares)
3.2 lakh
BSE code:
533261
NSE code:
EROSMEDIA
Sharekhan code:
EROSMEDIA
Free float:
(no. of shares)
2.4 cr
Shareholding pattern
Public &
Others Foreign
18%
4%
Institutions
1%
Nonpromoter
corporate
2%
Promoters
75%
The management remains optimistic on growth prospects in FY2015 and
FY2016E, driven by strong movies slate coupled with increasing opportunities
in catalogue monetisation. Also, given the strong movies library, the management
is planning to venture into premium pay TV for better monetisation, the plans
for the said venture is expected to be out in the next six months. The company’s
foray into the Telugu market has been gaining steam and it already has a good
presence in the Tamil market. The management indicated at co-production
routes in southern market in the next 6 to 12 months.
The movies slate for FY2015 has improved on the back of addition of bigstarrer regional movies (Rajinikanth’s Lingaa, Kaththi [Tamil, already released
and hugely successful]) and other Hindi movies. Given the strong margins’
outperformance and improving movies slate, we have increased our earnings
estimates for FY2015 and FY2016E, and also introduced FY2017 estimates. We
are positive on the EIML strategy on incremental focus on the regional movies
mainly Telugu, where the market size is improving meaningfully. We have rolled
over our target multiple to FY2017 and arrived at a price target of Rs360. The
stock has already shot up by 46% in the last three months, thus given the
limited upside from current levels, we maintain our Hold rating on the stock.
Rs cr
Particulars
330
290
250
210
170
Nov-14
Sep-14
Jul-14
May-14
Mar-14
Jan-14
130
Nov-13
For Q2FY15, Eros International Media Ltd (EIML) reported a 19.3% Y-o-Y growth in
revenues to Rs239.9 crore, led by movie releases like ‘Aagadu’ (Telugu), ‘Singham
Returns’ (Overseas) and ‘Mary Kom’ (Overseas) among others, and also strong
growth in the catalogue sales. EBITD margins improved by 515BPS YoY to 30.6%
driven by higher contribution from the high-margin television syndication and
catalogue sales. The net income for the quarter was up by 36% YoY to Rs50.1 crore.
Results
Price chart
Price performance
(%)
CMP: Rs329
1m
3m
6m 12m
Absolute 30.5
44.4
98.6
78.0
Relative 22.5
to Sensex
34.2
66.4
27.4
Net sales
Direct costs
Gross profit
Other costs
EBITDA
Depreciation
EBIT
Other income
Interest expenses
PBT
Tax provision
PAT
Minority interest
Net profit
Equity capital (FV Rs10/-)
EPS (Rs)
Margin (%)
GPM
EBITDA
EBIT
NPM
Tax rate
Sharekhan
2
Q2FY15
Q2FY14
Q1FY15
YoY %
QoQ %
239.9
144.8
95.2
21.8
73.4
1.7
71.7
0.4
10.9
61.2
11.1
50.1
0.0
50.1
92.1
5.4
201.1
139.4
61.7
10.5
51.2
1.3
49.9
0.4
6.2
44.1
8.5
35.6
-1.4
37.0
92.1
4.0
241.5
170.4
71.1
12.7
58.4
1.6
56.8
3.1
9.4
50.6
14.7
35.9
0.0
35.8
92.1
3.9
19.3
3.9
54.2
106.5
43.5
33.3
43.7
-4.8
76.1
38.7
30.3
40.7
NA
35.6
-0.7
-15.1
33.9
71.1
25.8
8.4
26.2
NA
16.5
21.0
-24.8
39.8
NA
39.8
35.6
39.8
39.7
30.6
29.9
20.9
18.1
30.7
25.4
24.8
18.4
19.2
29.4
24.2
23.5
14.8
29.1
November 18, 2014
515
508
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stock update
Valuations
Particulars
FY2014
FY1205E
FY2016E
FY2017E
Revenues (Rs cr)
1,134.6
1,321.9
1,545.1
1,806.7
Net profit (Rs cr)
199.7
242.7
280.0
328.3
29.3
21.5
15.3
17.2
EPS (Rs)
Y-o-Y growth (%)
21.7
26.4
30.5
35.7
EV/EBITDA
10.8
8.6
7.1
5.7
P/E (x)
15.1
12.4
10.8
9.2
RoE (%)
18.1
18.2
17.6
17.3
RoCE (%)
17.9
19.6
20.7
21.3
Film name
Star cast (director)
Tentative release
Kaththi (Tamil)
Vijay, Samantha Ruth Prabhu (A.R. Murugadoss) FY15
Lingaa
Rajinikanth, Sonakshi Sinha, Anushka Shetty
Q3FY2015
Tevar
Arjun Kapoor, Sonakshi Sinha, Manoj Bajpayee (Amit Sharma)
Q3FY2015
Happy Ending
Saif Ali Khan, Ileana D'Cruz (Raj and DK)
FY2015
NH 10
Anushka Sharma (Navdeep Singh)
FY2015
Action Jackson
Ajay Devgan, Sonakshi Sinha (Prabhu Deva)
FY2015
Badlapur
Varun Dhawan, Nawazuddin Siddiqui (Sriram Raghavan)
FY2015
Shamitabh
Dhanush, Amitabh Bacchan (R Balki)
FY2015
Tanu Weds Manu Season 2
R. Madhavan, Kangana Ranaut (Anand Rai)
FY2015
Aegadu (Telagu)
Mahesh Babu, Tamannaah (Srinu Vatila)
FY2015
Uttama Villain (Tamil)
Kamal Haasan (Ramesh Aravind)
FY2015
Rajini Murugan (Tamil)
(Siva Karthikeyan)
FY2015
Bajirao Mastani
Ranvir Singh, Deepika Padukone (Sanjay Leela Bhansali)
FY2016
Shivay
Ajay Devgan
FY2016
Farzi
Shahid Kapoor (Raj and DK)
FY2016
Gabbar Singh 2 (Telagu)
Pawan Kalyan
FY2016
Aankhen 2
Amitabh Bacchan
FY2016
Penoza
Kajol (Ajay Devgan)
FY2016
Untitled
Varun Dhawan (Rohit Dhawan)
FY2016
Dr Cabbie
Vinay Virmani, Kunal Nayar, Adrianne Palicki (Jean Francois)
FY2016
Banjo
Ritesh Deshmukh (Ravi Jadhav)
FY2016
Released
Source: Company
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.
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stock update
Pratibha Industries
Reco: Buy
Stock Update
Execution momentum continues while leverage yet to be controlled; maintain Buy
Key points
Company details
Price target:
Rs65
Market cap:
Rs573 cr
52 week high/low:
Rs67/22
NSE volume:
(no. of shares)
6.3 lakh
BSE code:
532718
NSE code:
PRATIBHA
Sharekhan code:
PRATIBHA
Free float:
(no. of shares)
5.4 cr
Promoters
47%
In Q2FY2015, Pratibha Industries Ltd (PIL)’s maintained strong execution with a
28% Y-o-Y growth in revenues, supported by an improvement of 56BPS margins.
However, higher interest cost (up 41% YoY) and depreciation charge (up 33%
YoY) led to lower profitability (the adjusted net profit fell by 26% YoY).
The company’s growth prospects seem to have revived on the back of an
improvement in execution and better OPM, as has been witnessed over the
past two quarters. A healthy order book of approximately Rs6,900 crore provides
revenue visibility for the next 2.0-2.5 years. We estimate the earnings of the
company would grow 2.4x over FY2014-16 driven by the factors mentioned
above.
We have revised our estimates upwards in view of signs of improvement in the
operating performance of the company. Further, we expect a gradual
improvement in the order inflow for the EPC sector as a whole which could
further boost the company’s order book. Consequently, we maintain our Buy
rating on the stock with a price target of Rs65.
Shareholding pattern
FII
10%
CMP: Rs57
Institutions
7%
Results
Public &
others
36%
Rs cr
Particulars
Q2FY15
Q2FY14
YoY %
Q1FY15
QoQ %
Net sales
713.3
555.7
28.4
690.7
3.3
Cost of work done
506.1
362.6
39.6
491.2
3.0
42.9
39.4
8.9
41.5
3.4
68.5
82.2
-16.7
64.8
5.7
617.5
484.1
27.5
597.4
3.4
Staff costs
Price chart
Other expenditure
70
Total operating expenses
60
50
40
30
Nov-14
Sep-14
Jul-14
May-14
Mar-14
Jan-14
Nov-13
20
Price performance
Operating profit
95.8
71.5
33.9
93.3
2.7
Other income
11.3
11.7
-3.5
10.2
10.7
Depreciation
13.3
10.0
32.9
13.0
2.3
Interest
76.7
54.3
41.3
66.0
16.2
PBT
17.1
18.9
-9.7
24.5
-30.2
Prior period income/expenses
0.0
12.7
Taxes
7.0
5.3
31.2
6.1
13.9
RPAT
10.1
0.8
1089.7
11.0
-8.6
-25.7
18.3
One-time items
(%)
1m
3m
6m 12m
Absolute
9.9
11.2
83.1 149.4
Relative
to Sensex
3.1
3.3
53.5
78.5
7.3
0.0
12.7
10.1
13.6
OPM
13.4
12.9
56BPS
13.5
-8BPS
NPM
1.4
2.4
-103BPS
2.7
-124BPS
41.0
28.2
1,276BPS
25.1
1,586BPS
APAT
7.3
-45.0
Margin (%)
Effective tax rate
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Revenues grew at 28.4% but adjusted PAT declined due
to interest burden: The consolidated revenues of PIL rose
by 28.4% year on year (YoY) to Rs713.3 crore in Q2FY2015.
The reported net profit during the quarter stood at Rs10.1
crore as against Rs0.8 crore during Q2FY2014. During the
quarter, the depreciation charge increased by 32.9% YoY
to Rs13.3 crore and the interest expense increased by
41.3% YoY to Rs76.7 crore which dented the overall
profitability as the adjusted net profit declined by 26%
YoY to Rs10.1 crore.
strong revenue visibility. We believe the strong order
backlog can materialise into a better earnings growth in
FY2015 and FY2016.
Maintain Buy with price target of Rs65: We were
concerned about the elongated working capital cycle and
the alarming rise in the debt/equity ratio of PIL. However,
we see signs of improvement in execution and expect an
improvement in the margins over the next couple of years.
Further, we expect a gradual improvement in the order
inflow for the engineering, procurement and construction
(EPC) sector as a whole which could further boost the
company’s order book. We believe the revenues and
operating profit will grow at a compounded annual growth
rate (CAGR) of 17% and 19% over FY2014-16, respectively;
the earnings are likely to grow 2.4x. Consequently, we
maintain our Buy rating on the stock with a price target
of Rs65.
Order inflow remained muted: The company did not
witness any order inflow during Q2FY2015 (as against a
healthy order inflow of Rs3,332 crore in FY2014 ), possibly
due to the consolidation of the business operations and
focus on execution of the existing orders rather than
securing new orders. Its current order book stands at about
Rs6,900 crore (3.0x its FY2014 revenues) which provides
Valuations (consolidated)
Particulars
FY2012
FY2013
FY2014
FY2015E
FY2016E
Net sales (Rs cr)
1,664.6
2,157.5
2,283.6
2,763.3
3,128.4
Y-o-Y growth %
EBITDA (Rs cr)
Margin (%)
Adjusted net profit (Rs cr)
31.3
29.6
5.8
21.0
13.2
218.1
284.1
303.4
373.7
430.5
13.1
13.2
13.3
13.5
13.8
82.6
89.9
39.0
50.1
95.1
Y-o-Y growth %
16.5
8.8
(56.6)
28.4
89.7
Shares in issue (cr)
9.9
10.1
10.1
10.1
10.1
EPS (Rs)
Y-o-Y growth %
PER (x)
Book value (Rs)
8.3
8.9
3.9
5.0
9.4
16.5
7.1
(56.6)
28.4
89.7
6.8
6.4
14.7
11.4
6.0
76.7
56.1
62.6
63.9
67.7
P/BV (Rs)
1.0
0.9
0.9
0.8
0.7
EV/EBIDTA (x)
6.2
6.8
8.2
6.5
5.8
RoCE (%)
17.5
14.5
11.1
13.4
15.2
RoNW (%)
15.9
15.1
6.1
7.5
13.0
Sharekhan Limited, its analyst or dependant(s) of the analyst might be holding or having a position in the companies mentioned in the article.
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