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Motilal Oswal initiates coverage with Buy on Prime Focus, sees 46% upside

Prime Focus has turned into a strong media service player globally, offering visual effects, 3D animation and media-focused ERP solutions in India and abroad.

October 17, 2017 / 10:59 AM IST
 
 
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Motilal Oswal has initiated coverage with a buy rating on Prime Focus and expects the stock to rally by 46 percent to Rs 130 per share, citing better growth ahead and likely reduction in debt.

The stock price was locked at 20 percent upper circuit at Rs 106.95 on Tuesday. There were pending buy orders of 26,236 shares, with no sellers available, at 10:54 hours IST.

Prime Focus has turned into a strong media service player globally, offering visual effects, 3D animation and media-focused ERP solutions in India and abroad.

The company turned profitable in FY17 post completion of M&A integration in FY15-16.

According to the brokerage house, the four M&A transactions in the last five years have allowed Prime Focus to become a strong media service player globally.

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The company's position as one of the top-4 Hollywood VFX service providers and a steady order book should drive 15/18 percent revenue/EBITDA CAGR over FY17-20, it feels.

Motilal Oswal noted that the demons of around 2.8x jump in net debt to Rs 1,390 crore and 50 percent equity dilution over the last five years are now behind.

Improving EBITDA and lower capex requirement are expected to help generate healthy free cash flow, improve return on invested capital to 19 percent, and reduce net debt by around 68 percent to Rs 450 crore by FY20, the research house said.
first published: Oct 17, 2017 10:59 am

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