Buy Shree Ashtavinayak; target of Rs 352: Emkay

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Buy Shree Ashtavinayak; target of Rs 352: Emkay

Emkay Research is bullish on Shree Ashtavinayak Cine Vision and has maintained buy rating on the stock with a target of Rs 352.

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Emkay Research is bullish on Shree Ashtavinayak Cine Vision and has maintained buy rating on the stock with a target of Rs 352. At current market price of Rs 239, the stock trades at 10x EPS FY08E and 6.8x EPS FY09E.

Emkay Research report on Shree Ashtavinayak Cine Vision:

Result update Shree Ashtavinayak Cine Vision (SACVL) declared its FY07 results with 59%  growth in the net sales to Rs 961 million. The Adj. EBITDA (after deducting cost of films produced and distributed) for the year increased by 79% yoy to Rs 224 million.  The Adj. EBIDTA margins during the year increased to 23.3% as against 20.7% for the last year. The PAT for the year increased by 89% yoy to Rs 142 million. The fully diluted EPS for the year stood at Rs 14.1. During the year, the company produced 2 films Golmaal and Bhagam bhag while it distributed 5 films (apart from in-house productions). The company is increasingly focusing on the film productions, which is not only high revenue generator but also profit accretive. The company plans to produce 4-5 films while it plans to distribute 6-7 films in the current year  (FY08). We maintain our estimates for FY08E and FY09E with an EPS of Rs 24.1 and Rs 35.2 respectively. We maintain our BUY recommendation on the stock with a price target of Rs352 (based on 10x EPS FY09E). 

Strong growth 

The company reported 59% growth in the net sales to Rs 961 million. The revenues from inhouse  productions increased by 108% yoy to Rs 657 million. The robust growth in the revenues from the production business is attributable to the successful releases of the films Golmaal and Bhagambhag. In the distribution segment, the company distributed 5 films in FY07 and realized revenues of Rs 302 million as against the distribution of 8 films in FY06 realizing revenues of Rs 271 million. Although the no of films distributed has reduced, the average collections have remained strong. On segmental basis, the production and distribution business contributed to 68.4% and 31.4% in FY07 as against 52.3% and 45% in FY06 respectively. We maintain our revenue estimates for FY08E and FY09E at Rs 1899 million and 2637 million respectively. 

Robust production pipeline 

The company produced two films GOLMAAL and BHAGAMBHAG in FY07. The company has a strong pipeline of films under production. The films planned for release in FY08 include, MR FRAUD directed by Abbas Mustan (starring Sanjay Dutt, Ajay  Devgan, Bipasha Basu), KIDNAP directed by Sanjay Gadhvi (starring Sanjay Dutt), and  three other movies, which are currently untitled and being directed by Imtiyaz Ali, Neeraj  Vora and Rohit Jugraj. Apart from these, the company has lined up a Tamil film  CHAKRA VYAGAM, which is likely to be released in FY08.

Outlook and Valuations

With a few successful box office releases, the company has established its footprint in the film industry. Given the popular star-cast and directors involved in the lined up projects, we expect the company to continue the momentum of growth in the revenue and profitability. We maintain our revenue estimates of Rs 1899 million and Rs 2637 million for FY08E and FY09E respectively. We expect the PAT to increase from Rs 142 million in FY07 to Rs 381 million in FY08 and Rs 548 million in FY09E respectively. At current market price of Rs 239, the stock trades at 10x EPS FY08E and 6.8x EPS FY09E. We maintain our BUY recommendation on the stock with a price target of Rs 352 based on10x EPS of Rs 35.2 for FY09E.