Buy Eros International, Mahindra Lifespace: ICICIdirect.com

ICICIdirect.com's research report

Eros International Media Eros International Media reported better-than-expected Q2FY14 numbers. The topline stood at Rs 201.1 crore (I-direct expectation: Rs 184.8 crore) while the EBITDA was recorded at Rs 51.2 crore vs. our estimate of Rs 32.4 crore. Revenues were chiefly aided by the global success of its movies such as Grand Masti, Raanjhanaa and some other regional releases. There was a 701 bps YoY EBITDA margin improvement due to lower administrative expenses. PAT stood at Rs 37 crore vs. our expectation of Rs 20.7 crore. The company has several big banner movies like Ram Leela, Kochadaiyaan and Krrish 3 (overseas) scheduled for release in the upcoming two quarters, which may prop up its performance in the second half of the fiscal. We value the stock at 10x FY14E EPS of Rs 17.4. Increasing number of overseas movie rights help Eros to reduce its dependence on the domestic box office performance. The company is trading at a significant discount to other media businesses. We maintain BUY with a target price of Rs 174 (10x FY14E EPS). Mahindra Lifespace Developers Mahindra Lifespace Developers (MLDL) reported a superior standalone bottomline led by higher other income (dividend from subsidiaries). However, the bottomline on a consolidated basis declined 17.8 percent to Rs 19.8 crore impacted by lower margins due to a low margin project mix. In terms of pre-sales, MLDL reported volumes of 0.16 million square feet (mn sq ft) in the residential segment worth Rs 72 crore. MLDL also entered into a 50:50 JV with SCM Real Estate (Singapore) Pvt Ltd (known as MHomes) for residential development with a combined investment intent of Rs 1,000 crore in the quarter. Considering attractive valuations, quality of management and recent land additions, we maintain our BUY rating. Considering the quality of the management and ramp up in the project portfolio led by recent land acquisition, we believe the current valuations are attractive. The stock is currently trading at an attractive valuation of 0.6x its potential NAV and 1.1x FY15E P/BV. Considering the quality of the management, we maintain our BUY recommendation with a target price of Rs 478 (0.6x its potential NAV). Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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