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Its success is built on the relationships that it has cultivated over the past 30 years with leading talent, production companies, exhibitors and other key participants in the industry. Leveraging these relationships, it has aggregated rights to over 1,900 films in its massive library, plus an additional 700-plus films for which it holds digital rights only.
The group has a distribution network that spans over 50 countries, with offices in India, UK, USA, Dubai, Australia, Fiji, Isle of Man and Singapore. In 2006, Eros International Plc, the holding company of the Eros Group, became the first Indian media company to list on the Alternative Investment Market (AIM) of the London Stock Exchange.
Shareholding Pattern: The Promoters hold 74.88% of the shares of the company, while the general public holds only 25.12%. Among the general public, 12.25% of the shares are held by institutions (FIIs--9.39% and DIIs--2.88%), so we have very little free shares available in the market for trade and this adds to the premium of the shares. Moreover, the FIIs have increased their holdings both on Q-o-Q and Sequential basis. According to a market statistician, on April 11, 2013 Morgan Stanley Asia Singapore PTE bought 500,000 shares of Eros International Media Ltd at Rs.171 on the BSE and bought 500,000 shares at Rs.171 on the NSE. CLICK HERE.
Brokerage Firm, GE Capital Ltd's Views:
(i) Deal with Endemol to open new content avenues for Eros: Eros and Endemol India (Endemol) have entered into an alliance to produce three feature films and co-produce original content programming for Television. An amount of Rs.1bn has been earmarked for producing the three films. The deal with Endemol would allow Eros to access Intellectual Property belonging to the former. Endemol has a great track record of versatile content across various genres on television such as Bigg Boss, Fear Factor and so on. Hence, the brokerage firm believes that the deal is a step in the right direction to penetrate into the fast expanding Rs.500bn television industry.
(ii) Impressive releases during the quarter: During the quarter Q3FY13, Eros released 21 films in all; 18 in Hindi and 3 in Non-Hindi (Regional). Some of the films worth mention are English Vinglish, Son of Sardaar, Thupakki, Maatraan and Khiladi768. These films are also among the best performing films released in India during the quarter.
Huge slate of releases in FY14 with potential to garner sizeable revenues For this year (FY14), Eros has an impressive line-up of movies involving big names such as Amitabh Bachchan, Rajnikanth, Hrithik Roshan and so on. The release of Kochadaiyaan which was scheduled for Q4FY13 has been postponed to Q1FY14 along with several other movies, hence we expect sales growth for FY13 to slow down to 13% versus 20% estimated earlier. For FY14, Sales is expected to grow at 23% versus 19% estimated earlier.
(ii) Valuation & Viewpoint: At CMP of Rs.165.85 Eros is trading at 7.61x its FY14E EPS of Rs.21.77. The brokerage house expects that FY14 would be a high growth year as revenues from the HBO deal will begin to trickle in. The enthusiastic response to Offer For Sale by promoter (4.4x over-subscription) showed considerable investor interest in the company’s growth story. The company paid its maiden dividend of Rs.1.50 per share during the quarter. The Brokerage house has valued the stock at its long term P/E multiple of 11x to arrive at the target price of Rs.238 with a BUY rating.
Conclusion: Apart from what is mentioned above, it is important to note: Eros International Plc & HBO Asia's joint announcement to launch two new premium advertising-free movie channels, HBO DEFINED and HBO HITS in India, which are expected to be money spinners in the coming days. Also, EIML has recently signed a licensing agreement with colors’ Viacom18 Media Pvt. Ltd. Besides this the analysts are expecting Net Sales and PAT of the company to grow at a CAGR of 20--22% in the coming years.
The investors can therefore buy the scrip at the CMP of Rs.165.85, for a medium term target of Rs.230 and a short term target of Rs.192.