Hold Eros International; target of Rs 225: ICICI Direct

Eros's Q4FY16 revenues were expected to be subdued in the quarter as it had no big budget movie release. During the quarter, there were six medium and six low budget movies, respectively. Hence, revenues came in at Rs 269.9 crore, down 39.9% YoY and 19.5% QoQ. EBITDA came in at Rs 32.1 crore vs. our expectation of Rs 37.9 crore while margins came in at 11.9% (estimated 14.9%). Margins came in lower than estimated owing to higher-than-expected operating expenses, which came in at Rs 208.3 crore vs. estimate of Rs 199 crore. PAT came in at Rs 32.7 crore, higher than our estimate of Rs 21.9 crore. The beat was due to tax credit of Rs 5 crore.

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 re-align our estimates incorporating the changes from the revised transfer pricing arrangement valuing Eros at 8x FY18E EPS to arrive 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.