Buy Eros International Media; target of Rs 213: KRChoksey

KRChoksey's report on Eros International Media

"Eros International Media, revenue grew by 17 percent YoY to Rs.433 crore in Q3 FY14 against our expectation of Rs.404 crore. Positive surprise at revenue front was led by huge spurt in catalogue monetization which increased by around 75 percent YoY to Rs.60 crore in Q3 FY14. Revenue from other main streams such as theatrical and satellite rights were more or less in with expectation i.e. ~Rs.170 crore (39 percent of revenue) and ~Rs.110 crore (25 percent of revenue), respectively, in Q3 FY14. EBITDA margin improved by 679 bps QoQ to 31.3 percent in 3Q FY14 significantly better than our estimates of 25 percent margin level. Higher than expected EBITDA margin was primarily led by catalogue monetization as minimum expenditure is incurred for earning the same and hence top-line directly flows to bottom-line."

Valuation and view: "We believe strong movie slate lined-up for release in FY15E will support mid-teen growth rate in the coming year. Moreover, we expect EBITDA margin will continue to be in the range of 25 percent supported by catalogue monetization. Further, clarity from Parent Company in respect of terms for sharing overseas films rights on agreement renewal will remove major overhang on the stock. We recommend "BUY" on the stock with a price target of Rs 213 by assigning P/E multiple of 13 times to FY15E adjusted EPS of Rs.16.4," says KRChoksey research report.

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