Buy Eros Intl; target of Rs 264: KRChoksey

KRChoksey research report on Eros International Media

Eros has acquired controlling stake in Techzone (a leading mobile value added  service provider) for ~Rs.50 crore. Acquisition of Techzone will enable the company to tap mobile subscribers in India. Techzone provides option to mobile subscribers for availing services by debiting their mobile bill instead of using credit/debit card. The company has not revealed financials of Techzone; however mentioned that it has net profit margin of 15% and earnings are less than Rs.10 crore. Moreover, the company has tied up with Hathway Cable for marketing its premium ‘Eros Now’ services to their subscribers.  We believe, the steps taken by Eros to augment its revenue from Digital Platforms is a step in right direction; as digital platform not only provides additional source of revenue but also provide revenue visibility (being annuity in nature).

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 26% supported by catalogue monetization and traction in different digital platforms. We recommend “BUY” on the stock with a price target of Rs.264 by assigning P/E multiple of 10 times to FY16E EPS of Rs.26.4.

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