Hold Eros International; target of Rs 225: ICICI Direct

Revenues came in at Rs 408.2 crore higher than expectations of Rs 363.8 crore aided by the successful box-office run of some of the Eros banner films such as Housefull 3’, Ki and Ka, Sardaar Gabbar Singh’ (Telugu), 24’ (Tamil), and Nil Battey Sannata’ among a host of other films. The revenues were also aided by satellites sales of some of the movies released in the quarter EBITDA came in at Rs 81.0 crore vs. our expectation of Rs 71.8 crore while margins came in at 19.8%. Though the costs were higher than expectations, increased contribution from the higher margin earning satellite revenues helped Eros in clocking in-line margins. PAT came in at Rs 58.9 crore, higher than our estimate of Rs 39.7 crore owing to the beat at the operating performance level and lower than expected tax expenses.

The company has done its best to come clear of the recent allegations. The new transfer pricing mechanism is an added positive. However, clarity on the Eros Now potential and rationale for 10-15% stake would have been better. We value Eros at 8x FY18E EPS arriving at a target price of Rs 225. We maintain HOLD.For all recommendations, click here 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.