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 Stock Update >> Eros International Media

 Stock Update >> Pratibha Industries

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Eros International Media Reco: Hold

Stock Update

Impressive show, price target revised to Rs360 CMP: Rs329

Company details Key points  Price target: Rs360 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 Market cap: Rs3,030 cr Returns’ (Overseas) and ‘Mary Kom’ (Overseas) among others, and also strong 52 week high/low: Rs328/136 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 NSE volume: 3.2 lakh catalogue sales. The net income for the quarter was up by 36% YoY to Rs50.1 crore. (no. of shares)  The management remains optimistic on growth prospects in FY2015 and BSE code: 533261 FY2016E, driven by strong movies slate coupled with increasing opportunities NSE code: EROSMEDIA in catalogue monetisation. Also, given the strong movies library, the management is planning to venture into premium pay TV for better monetisation, the plans Sharekhan code: EROSMEDIA for the said venture is expected to be out in the next six months. The company’s Free float: 2.4 cr foray into the Telugu market has been gaining steam and it already has a good (no. of shares) presence in the Tamil market. The management indicated at co-production routes in southern market in the next 6 to 12 months. Shareholding pattern  The movies slate for FY2015 has improved on the back of addition of big- Public & starrer regional movies (Rajinikanth’s Lingaa, Kaththi [Tamil, already released Others Foreign and hugely successful]) and other Hindi movies. Given the strong margins’ 4% 18% outperformance and improving movies slate, we have increased our earnings estimates for FY2015 and FY2016E, and also introduced FY2017 estimates. We Institutions are positive on the EIML strategy on incremental focus on the regional movies 1% mainly Telugu, where the market size is improving meaningfully. We have rolled Non- over our target multiple to FY2017 and arrived at a price target of Rs360. The promoter stock has already shot up by 46% in the last three months, thus given the corporate limited upside from current levels, we maintain our Hold rating on the stock. 2% Promoters Results Rs cr 75% Particulars Q2FY15 Q2FY14 Q1FY15 YoY % QoQ % Price chart Net sales 239.9 201.1 241.5 19.3 -0.7 Direct costs 144.8 139.4 170.4 3.9 -15.1 330 Gross profit 95.2 61.7 71.1 54.2 33.9 290 Other costs 21.8 10.5 12.7 106.5 71.1 EBITDA 73.4 51.2 58.4 43.5 25.8 250 Depreciation 1.7 1.3 1.6 33.3 8.4 210 EBIT 71.7 49.9 56.8 43.7 26.2 170 Other income 0.4 0.4 3.1 -4.8 NA Interest expenses 10.9 6.2 9.4 76.1 16.5 130 PBT 61.2 44.1 50.6 38.7 21.0 Tax provision 11.1 8.5 14.7 30.3 -24.8

Jul-14 PAT 50.1 35.6 35.9 40.7 39.8 Jan-14 Mar-14 Nov-13 Sep-14 Nov-14 May-14 Minority interest 0.0 -1.4 0.0 NA NA Price performance Net profit 50.1 37.0 35.8 35.6 39.8 Equity capital (FV Rs10/-) 92.1 92.1 92.1 (%) 1m 3m 6m 12m EPS (Rs) 5.4 4.0 3.9 35.6 39.8 Margin (%) Absolute 30.5 44.4 98.6 78.0 GPM 39.7 30.7 29.4 EBITDA 30.6 25.4 24.2 515 Relative 22.5 34.2 66.4 27.4 EBIT 29.9 24.8 23.5 508 to Sensex NPM 20.9 18.4 14.8 Tax rate 18.1 19.2 29.1 (117)

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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 Y-o-Y growth (%) 29.3 21.5 15.3 17.2 EPS (Rs) 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 Released Lingaa Rajinikanth, , Anushka Shetty Q3FY2015 Tevar , Sonakshi Sinha, Manoj Bajpayee () 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

Source: Company

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Pratibha Industries Reco: Buy

Stock Update

Execution momentum continues while leverage yet to be controlled; maintain Buy CMP: Rs57

Company details Key points

Price target: Rs65  In Q2FY2015, Pratibha Industries Ltd (PIL)’s maintained strong execution with a

Market cap: Rs573 cr 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% 52 week high/low: Rs67/22 YoY) led to lower profitability (the adjusted net profit fell by 26% YoY). NSE volume: 6.3 lakh  (no. of shares) 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 BSE code: 532718 past two quarters. A healthy order book of approximately Rs6,900 crore provides NSE code: PRATIBHA revenue visibility for the next 2.0-2.5 years. We estimate the earnings of the Sharekhan code: PRATIBHA company would grow 2.4x over FY2014-16 driven by the factors mentioned above. Free float: 5.4 cr (no. of shares)  We have revised our estimates upwards in view of signs of improvement in the operating performance of the company. Further, we expect a gradual Shareholding pattern 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 FII rating on the stock with a price target of Rs65. 10% Institutions 7% Promoters 47% Results Rs cr Public & Particulars Q2FY15 Q2FY14 YoY % Q1FY15 QoQ % others 36% 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

Price chart Staff costs 42.9 39.4 8.9 41.5 3.4 Other expenditure 68.5 82.2 -16.7 64.8 5.7 70 Total operating expenses 617.5 484.1 27.5 597.4 3.4 60 Operating profit 95.8 71.5 33.9 93.3 2.7 50 Other income 11.3 11.7 -3.5 10.2 10.7 40 Depreciation 13.3 10.0 32.9 13.0 2.3 30 Interest 76.7 54.3 41.3 66.0 16.2 20 PBT 17.1 18.9 -9.7 24.5 -30.2 Prior period income/expenses 0.0 12.7 7.3 Jul-14 Jan-14 Mar-14 Nov-13 Sep-14 Nov-14 May-14 Taxes 7.0 5.3 31.2 6.1 13.9 Price performance RPAT 10.1 0.8 1089.7 11.0 -8.6 One-time items 0.0 12.7 7.3 (%) 1m 3m 6m 12m APAT 10.1 13.6 -25.7 18.3 -45.0

Absolute 9.9 11.2 83.1 149.4 Margin (%) OPM 13.4 12.9 56BPS 13.5 -8BPS Relative 3.1 3.3 53.5 78.5 NPM 1.4 2.4 -103BPS 2.7 -124BPS to Sensex Effective tax rate 41.0 28.2 1,276BPS 25.1 1,586BPS

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Revenues grew at 28.4% but adjusted PAT declined due strong revenue visibility. We believe the strong order to interest burden: The consolidated revenues of PIL rose backlog can materialise into a better earnings growth in by 28.4% year on year (YoY) to Rs713.3 crore in Q2FY2015. FY2015 and FY2016. The reported net profit during the quarter stood at Rs10.1 crore as against Rs0.8 crore during Q2FY2014. During the Maintain Buy with price target of Rs65: We were quarter, the depreciation charge increased by 32.9% YoY concerned about the elongated working capital cycle and to Rs13.3 crore and the interest expense increased by the alarming rise in the debt/equity ratio of PIL. However, 41.3% YoY to Rs76.7 crore which dented the overall we see signs of improvement in execution and expect an profitability as the adjusted net profit declined by 26% improvement in the margins over the next couple of years. YoY to Rs10.1 crore. Further, we expect a gradual improvement in the order inflow for the engineering, procurement and construction Order inflow remained muted: The company did not (EPC) sector as a whole which could further boost the witness any order inflow during Q2FY2015 (as against a company’s order book. We believe the revenues and healthy order inflow of Rs3,332 crore in FY2014 ), possibly operating profit will grow at a compounded annual growth due to the consolidation of the business operations and rate (CAGR) of 17% and 19% over FY2014-16, respectively; focus on execution of the existing orders rather than the earnings are likely to grow 2.4x. Consequently, we securing new orders. Its current order book stands at about maintain our Buy rating on the stock with a price target Rs6,900 crore (3.0x its FY2014 revenues) which provides of Rs65.

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 % 31.3 29.6 5.8 21.0 13.2 EBITDA (Rs cr) 218.1 284.1 303.4 373.7 430.5 Margin (%) 13.1 13.2 13.3 13.5 13.8 Adjusted net profit (Rs cr) 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) 8.3 8.9 3.9 5.0 9.4 Y-o-Y growth % 16.5 7.1 (56.6) 28.4 89.7 PER (x) 6.8 6.4 14.7 11.4 6.0 Book value (Rs) 56.1 62.6 63.9 67.7 76.7 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

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