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Private Client Group - PCG RESEARCH P a g e | 1
PCG RESEARCH MEDIA & ENTERTAINMENT Sep 17, 2016
We believe, Indian Media and Entertainment (M&E) Industry is a high growth sector on cusp of take-off. The
sector is providing impetus to country's overall economic growth and likely to zoom ahead backed by rising
consumer demand and improving advertising revenues. This industry is expected to grow at a Compounded
Annual Growth Rate (CAGR) of 14 % year-on-year to reach Rs. 2,26,000 crore by 2020.
Digital India campaign of Government of India launched by the Prime Minister Shri Narendra Modi in July
2015 - with an objective of connecting rural areas with high-speed Internet networks and improving digital
more be limited in urban area. Today also approximately 35% of internet users are from rural India. Internet
is fast becoming a mainstream media for entertainment for most of the people and this disruption is going to
affect many players in the Industry.
Television and traditional electronic Media, Print, Films, Radio, Music, Out of Home advertising, Animation
and Gaming, all the sub-sectors of the industry are attracting huge investor interest and also experiencing
disruptions from the innovations from the technology. Nimble technology driven firms and companies with
better hooks to large internet players who control Search, social media and traffic will emerge as winners.
India's Digital Advertising market has grown at a fast pace of 33 % annually between 2010 and 2015, while
this portion as a percentage of total advertising increased to 13% or nearly US$ 1 billion in 2015. We believe
this is likely to rise faster going ahead.
Introduction of a multi-phase digitisation policy by the Government of India regarding the mandatory
digitization of the Cable Services created a huge opportunity for broadcasters to monetize their services.
Broadcasters have been able to garner higher amount of subscription revenues and better target advertising
revenues. Earlier, we highlighted this opportunity and picked and recommended Zee Entertainment
Enterprises (ZEEL) multiple times to our investors as an investment idea since the price of Rs. 170 in 2012.
(Now stock price has surged to Rs.520)
As a part of this report, we are initiating coverage in three companies namely and TV Today Networks, UFO
Moviez and Balaji Telefilms. These companies are poised for higher than usual growth and/or are on cusp of
some innovation which can change their fortunes.
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 2
The First Stock we recommend TV Today Networks.
The leadership position of Aaj Tak as the No. 1 News Channel for the last 15 years in a row since inception
has contributed to the growth in advertising revenues. The revamped English news channel, India Today has
shown stellar growth and has already become the No. 2 English News channel in less than a year since
launch.
The new rating currency of BARC Rating System has ranked channels like Aaj Tak, India Today Television,
Tez and Dilli Aaj Tak extremely favorably. This new reliable rating system will lead to disruptions and
differentiation in advertising revenues between various players and we expect robust ratings to lead to
superior growth in revenues for market leaders like TV Today.
Selling its Radio business and focusing on its core new business augers well for the company.
The Second stock we recommend UFO Moviez.
It is India’s largest satellite-based, digital cinema distribution network and in-cinema advertising platform in
terms of number of screens. By reducing distribution costs, providing reach to a wide network, providing a
faster method of delivery of content and reducing piracy through encryption and other security measures, it
has revolutionized the distributor segment the cinema business value-chain.
Using technology, their products like Club Cinema provides movie screenings of recently released films in
clubs and community centers at private screens, such as remote industrial townships, corporate auditoriums,
educational institutions and other leisure and entertainment complexes.
The Final stock we have picked up Balaji Telefilms Ltd.
Ekta Kapoor - the undisputed queen of daily soap operas led Balaji Telefilms is ruling roost on small screens
for decades and produced over 15,000 hours of television content, the company is aiming that three different
segments – TV, Movies and Digital platform (ALT) to contribute equally to revenues by 2020.
Content creators companies like Balaji who are hitherto dependent on other Business players (B2B) for
delivery of their products can now think of connecting with their ultimate consumers directly (B2C) with the
help of new distribution mediums like Internet. The adaption rates in digital world are meteoric. Digital
channel – ALT Digital is slated for launch later this year. Company hopes to monetize the potential of on-
demand entertainment on digital platforms by catering to content across mobiles, computers, tablets, smart
TVs and game stations.
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 3
Industry CMP Recommendation Buying Range Target Time Horizon
Broadcasting & Cable TV Rs. 303 BUY Rs. 303- 275 Rs. 345 - 388 12 months
HDFC Scrip Code TVTODA
BSE Code 532515
NSE Code TVTODAY
Bloomberg TVTN IN
CMP as on 16 Sep’16 303
Equity Capital (Rs Cr) 29.8
Face Value (Rs) 5
Equity O/S (Cr) 5.96
Market Cap (Rs cr) 1805
Book Value (Rs) 89
Avg. 52 Week Volumes
122337
52 Week High 351
52 Week Low 221
Shareholding Pattern (%)
Promoters 57.2
Institutions 12.1
Non Institutions 30.7
Kushal Rughani [email protected]
TV Today with its flagship channel Aaj Tak has been able to maintain its dominant position in the
fiercely competitive Hindi news segment for over a decade. The news segment, directly targeting
“decision makers” in the family, enjoys a good portion of the advertisement share, which is
expected to rise even further as literacy and income levels rise. With digitisation in phase III
and IV in tier II and III cities, TV Today would be able to better monetise its reach as it enjoys a
far stronger position in the smaller cities and towns in the Hindi speaking belt. We expect 15%
revenue and 23% PAT cagr over FY16-19E on the back of strong revenue growth and
improvement in operating performance. The company is debt free with ~Rs170cr cash and cash
equivalents on its balance sheet. EBITDA margins are expected to expand 220bps to 29% with
the exit from radio business. We value the stock at ~13x of FY19E EPS of ~Rs29 and ascribe
price targets of Rs345 and Rs388 over the next 12 months.
Investment Rationale
Aaj Tak continues to remain Market Leader, India Today catching up at rapid pace
Aaj Tak has been able to consistently maintain its dominant position with~25-30% viewership market share
among top five Hindi news channels. Though company faces tough competition from other players but
through advertising campaigns and further fine-tuning its content it has gained back its No.1 position, and
has been the consistent market leader. The English news channel, India Today continues to show traction
post several renowned journalists such as Karan Thapar & Rajdeep Sardesai coming on board. India Today’s
ad revenues have been growing at a stellar pace and now form ~20% of broadcasting ad revenues. Apart
from the flagship channel, the company will also benefit from increasing utilisations in the English news
channel. TV Today Network is one of India's leading Hindi-English news television networks. The company's
operating segments include television broadcasting through which the company operates four news
channels, which include Aaj Tak, India Today (earlier known as Headlines Today), Tez and Dilli Aaj Tak. We
expect revenues to grow at 12% yoy, 17% yoy and 15% yoy to Rs611cr, Rs717cr and Rs825cr in FY17E,
FY18E and FY19E respectively.
PCG RESEARCH
INVESTMENT IDEA 17 Sep 2016
TV Today Networks
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 4
News being non-proprietary and largely non-exclusive in nature, the content is largely similar among various
news channels. In such a case, the ability to break the news first or give detailed coverage of the event by
sending a team to the source becomes the differentiating point. In such a case, where the content is highly
homogeneous, usually the top one or two players are key beneficiaries. On those lines, Aaj Tak has been able
to maintain a leadership position in the last decade. With a viewership share of ~18.5% in the Hindi news
segment and ~8.7% of the overall news segment, The demographic set-up augurs well for TV Today with its
offerings in terms of Hindi news channels, which is also reflected in its higher share of advertisement
revenue.
Q1 Update
TV Today posted revenue growth of 9% yoy to ~Rs136cr, Advertisement revenues continued to remain
healthy with major growth driven by English Channel. The FM radio broadcasting arm revenues continued to
post a decline of 45.0% YoY and came in at Rs1.3cr as a result of sale of four stations to ENIL in Q2FY16
EBITDA was at Rs37cr with margins of 26.9%; company reported PAT of Rs22cr, +23% yoy.
Radio business
Under the brand Oye 104.8 FM. The company had a presence in the six cities of Mumbai, Delhi, Kolkata,
Amritsar, Jodhpur and Patiala. However, the company has been unable to keep pace with its peers in the
radio segment and has been experimenting with different formats. It had started off as Meow 104.8 FM for
women in 2007. However, since the strategy did not click with listeners, the company re-branded itself to
Oye 104.8 FM based on the “filmy” format. In Sep 2015, company has sold off 4 Radio Stations for cash
consideration of Rs 4cr. The stations include Jodhpur, Amritsar, Patiala and Shimla which contributed Rs3cr
as revenues in FY15. Radio’s current contribution to the overall revenues of the company was minuscule at
2-3%, however it was loss making business. The sale of the remaining three stations in Delhi, Mumbai &
Kolkata denied approval by the MIB and is still pending. The company has, for the time being, entered into
an airtimes sales agreement with ENIL, which will help it in gaining a wider network in terms of airtime sales.
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 5
TV Today enjoys trust of masses
News as a business has very unique dynamics, as it is largely nonproprietary and non-exclusive in nature.
Moreover, news as a domain, creates a sizeable impact on the society by not only creating awareness but
also influencing decisions and shaping opinions. Hence, it becomes imperative for news channel to be
unbiased and disseminate authentic news. Trust becomes the most important parameter to judge the
efficiency of a news channel. TV Today enjoys excellent brand loyalty and has emerged as the viewer’s
choice news channel. There are larger players with deeper pockets such as Zee News, ABP News and ETV
News. However, TV Today still continues to lead the major news channels in the Hindi space, owing to its
credibility and quality.
Financial performance
TV Today has reported a strong ~18% CAGR in top-line due to strong advertising revenue growth over the
past three years. We expect the company to continue to report healthy top-line growth on back of strong
growth in advertisement revenue and also subscription revenue with digitalization of phase III & IV. On the
operating front, we expect margin to improve owing to the price hike initiated in the ad segment and exited
loss making radio business a year back. Benefits would also be availed on account of the base effect as a
one-time expense of ~16cr towards rebranding of the English new channel was incurred last year. We expect
15% revenue and 23% PAT cagr over FY16-19E on the back of strong revenue growth and improvement in
operating performance. The company is debt free with ~Rs170cr cash and cash equivalents on its balance
sheet. TV Today has been able to take a hike in ad yields owing to its leadership position in the Hindi news
genre. In addition, there has been incremental revenue flow from the English Channel India Today, which has
been able to improve its ranking in the English news genre. We expect TV Today to post 18% CAGR in
EBITDA with 15% CAGR in revenue in FY16-19E. EBITDA margins are expected to expand 220bps to 29%
with the exit from radio business. We value the stock at ~13x of FY19E EPS of ~Rs29 and ascribe price
targets of Rs345 and Rs388 over the next 12 months.
Key Risks
Loss of leadership in viewership could affect the company’s advertisement revenue.
Overall slowdown in the Indian economy could lead to a cut in ad spend allocations by corporates
which would be negative.
Any delay in digitalization could impact the company’s subscription revenue growth.
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 6
Financial Summary (Rs cr)
FY14 FY15 FY16 FY17E FY18E FY19E
Net Sales 389 477 546 611 717 825
EBITDA 109 132 146 166 209 240
PAT 62 81 94 113 151 174
EPS (Rs) 10.3 13.6 15.8 19.0 25.3 29.2
P/E (x) 29.4 22.2 19.1 16.0 12.0 10.4
EV / EBITDA (x) 14.1 11.7 10.5 9.3 7.3 6.4
RoE (%) 17.5 19.6 19.2 19.2 21.9 21.1 Source: Company, HDFC sec Research
PCG RESEARCH
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Revenue to post 15% cagr over FY14-19E
389
477546
611
717
825
100
200
300
400
500
600
700
800
900
1000
FY14 FY15 FY16 FY17E FY18E FY19E
Rs
Cr
Source: Company, HDFC sec Research
Operating Cash Flow
32
68
60
92
7471
25
50
75
100
125
FY14 FY15 FY16 FY17E FY18E FY19E
Source: Company, HDFC sec Research
EBITDA and PAT trend over FY14-19E
0
50
100
150
200
250
300
FY14 FY15 FY16 FY17 FY18E FY19E
EBITDA PAT
Source: Company, HDFC sec Research
Robust return ratios (RoE/RoCE)
10.0
15.0
20.0
25.0
30.0
FY15 FY16 FY17E FY18E FY19E
RoE RoCE
Source: Company, HDFC sec Research
PCG RESEARCH
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Income Statement (Consolidated)
(Rs Cr) FY14 FY15 FY16 FY17E FY18E FY19E
Net Revenue 389 477 546 611 717 825
Growth (%) 24.4 22.5 14.5 12.0 17.3 15.1
Operating Expenses 281 345 400 445 508 586
EBITDA 109 132 146 166 209 240
Growth (%) 211.1 21.0 11.0 13.4 26.2 14.4
EBITDA Margin (%) 28.0 27.6 26.8 27.1 29.2 29.0
Depreciation 24 30 31 28 28 31
EBIT 85 102 116 138 181 209
Other Income 12 23 32 36 41 48
Interest 4 2 0 1 0 0
PBT 91 123 147 169 220 253
Tax 29 42 53 58 71 81
RPAT 62 81 94 113 151 174
Growth (%) 430.2 32.2 16.1 19.8 33.5 15.5
EPS 10.3 13.6 15.8 19.0 25.3 29.2
Source: Company, HDFC sec Research
Balance Sheet (Consolidated)
(Rs Cr) FY14 FY15 FY16 FY17E FY18E FY19E
SOURCE OF FUNDS
Share Capital 30 30 30 30 30 30
Reserves 349 420 502 594 716 855
Shareholders' Funds 379 450 532 624 746 885
Long term Debt 17 18 13 8 5 0
Net Deferred Taxes -16 -16 -15 -15 -15 -15
Other current Liabs 48 34 40 47 55 68
Long Term Provisions & Others 11 11 13 18 21 23
Total Source of Funds 439 497 582 751 881 997
APPLICATION OF FUNDS
Net Block 213 201 186 193 209 225
Intangibles 4 38 33 30 27 25
Investment 46 46 40 50 70 84
Long Term Loans & Advances 6 6 28 34 41 49
Total Non-Current Assets 269 291 287 306 347 383
Inventories 0 0 0 0 0 0
Trade Receivables 110 137 157 179 205 222
Cash & Equivalents 57 95 161 243 282 288
Other Current Assets 48 40 53 61 130 227
Total Current Assets 215 272 371 483 616 737
Trade Payables 53 61 71 80 94 109
Other Current Liab & Provisions 56 45 53 62 78 93
Total Current Liabilities 108 107 124 143 172 202
Net Current Assets 146 165 286 445 534 636
Total Application of Funds 439 497 582 751 881 997 Source: Company, HDFC sec Research
PCG RESEARCH
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Cash Flow Statement (Consolidated) (Rs Cr) FY14 FY15 FY16 FY17E FY18E FY19E
Reported PBT 91 123 147 169 220 253
Non-operating & EO items -12 -23 -32 -36 -41 -48
Interest Expenses 4 2 0 1 0 0
Depreciation 24 30 31 28 28 31
Working Capital Change -28 -12 -19 -14 -63 -84
Tax Paid -29 -42 -53 -58 -71 -81
OPERATING CASH FLOW ( a ) 32 68 60 92 74 71
Capex -11 -5 4 -15 -29 -37
Free Cash Flow 39 73 78 77 46 34
Investments 0 0 5 -10 -20 -14
Non-operating income 12 23 32 36 41 48
INVESTING CASH FLOW ( b ) 1 18 41 11 -8 -3
Debt Issuance / (Repaid) -17 0 0 0 0 0
Interest Expenses -4 -2 0 -1 0 0
FCFE 18 72 78 75 46 34
Share Capital Issuance 0 0 0 0 0 0
Dividends -7 -11 -12 -19 -27 -33
Financing Cash Flow -28 -12 -12 -21 -27 -34
Net Cash Flow (a+b+c) 5 74 89 82 39 34 Source: Company, HDFC sec Research
Key Ratio (Consolidated)
Key Ratios (%) FY14 FY15 FY16 FY17E FY18E FY19E
EBITDA Margin 28.0 27.6 26.8 27.1 29.2 29.0
EBIT Margin 21.8 21.3 21.2 22.5 25.3 25.3
APAT Margin 15.8 17.0 17.3 18.5 21.1 21.1
RoE 17.5 19.6 19.2 19.2 21.9 21.1
RoCE 22.7 23.8 22.9 23.1 25.7 24.9
Solvency Ratios
Net Debt/EBITDA -0.4 -0.6 -1.0 -1.5 -1.7 -1.9
Net D/E -0.1 -0.2 -0.3 -0.4 -0.5 -0.5
Interest Coverage 30.3 87.9 731.4 126.1 1073.5 3193.7
Per Share Data
EPS 10.3 13.6 15.8 19.0 25.3 29.2
CEPS 14.4 18.7 21.0 23.7 30.0 34.4
BV 63.5 75.4 89.2 104.6 125.1 148.4
Dividend 1.0 1.5 1.8 2.8 3.9 4.8
VALUATION
P/E 29.4 22.2 19.1 16.0 12.0 10.4
P/BV 4.8 4.0 3.4 2.9 2.4 2.0
EV/EBITDA 14.1 11.7 10.5 9.3 7.3 6.4
EV / Revenues 4.0 3.2 2.8 2.5 2.1 1.9
Dividend Yield (%) 0.3 0.5 0.6 0.9 1.3 1.6 Source: Company, HDFC sec Research
PCG RESEARCH
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50.0
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400.0
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Price History
Rating Definition:
Buy: Stock is expected to gain by 10% or more in the next 1 Year. Sell: Stock is expected to decline by 10% or more in the next 1 Year.
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 11
Industry CMP Recommendation Buying Range Target Time Horizon
Specialty Retail Rs. 465 BUY Rs. 465 - 430 Rs. 510 - 555 3-4 quarters
Vanillin to be the key growth driver
HDFC Scrip Code UFOMOV
BSE Code 539141
NSE Code UFO
Bloomberg UFOM IN
CMP as on 16 Sep’16 465
Equity Capital (Rs Cr) 25.9
Face Value (Rs) 10
Equity O/S (Cr) 2.59
Market Cap (Rs cr) 1283
Book Value (Rs) 203
Avg. 52 Week Volumes
105189
52 Week High 625
52 Week Low 380
Shareholding Pattern (%)
Promoters 28.9
Institutions 51.5
Non Institutions 19.6
Kushal Rughani [email protected]
UFO Moviez is India’s largest digital cinema distribution network with a screen network of
~6636 worldwide, including 4940 screens in India and remaining worldwide. The distribution
business constitutes about 51% of its revenues and has grown at 40% CAGR in FY12-15 to
Rs232crore. UFO also provides digital equipment to exhibitors for lease/sale, which forms ~20%
of its revenues. UFO expects the stream to show further traction as minutes of ad sold and yields
increase. The average minutes of ad (sold on a per screen per show basis) has been on the rise,
increasing from 2.02 minutes in FY11 to 3.4 minutes in FY15 and ~4 minutes as on Jun 2016
bolstered by growth in ad minutes. This led to an increase in ad revenues from Rs32 crore to
Rs117 crore over the same time period. The time of ad per show in single screens still lags
behind the average ad minutes in multiplexes, which are nearly 4.5x that of single screens. As
the ad minutes in UFO screens begin to increase, it will have a multiplier effect on revenues. As
per the management increase in ad yields would come once ad minutes reach maturity; the
combined impact of the ad volume and which could give revenue potential of ~>Rs500crore to
ad revenues over the long term. We expect robust growth momentum to continue with ~13%
and 25% cagr respectively over FY16‐18E driven by growth from Ad Revenues and content
segment. We expect margins to ramp up slowly to ~32%. UFO had come out with an IPO at
Rs625 and issued 96 lakh equity shares through offer for sale and raised Rs600cr in Apr 2015. At
the current market price of Rs465, the stock trades at ~13x FY18E EPS. We believe UFO has got
upside potential given the accompanying business fundamentals. We initiate as BUY on the stock
at Rs465 and add on declines to Rs430 and with price targets of Rs510 and Rs555 over the next
3-4 quarters.
Investment Rationale
Innovative business models may be growth drivers in future
UFO has created a pan-India, high-impact, in-cinema advertising platform, generally with long-term
advertising rights, with respect to 3,713 screens, under a win-win revenue share deals with the theatres. As
at March 31, 2016, UFO has an aggregate seating capacity of approximately 1.78mn viewers and a reach of
over 1,900 locations across India. During the year, UFO’s in cinema Advertisement platform delivered an
estimated viewership of over 10mn on a monthly basis. UFO’s in-cinema advertising platform enables
advertisers to reach a targeted, captive audience with high flexibility and control over the advertising
process.
PCG RESEARCH
INVESTMENT IDEA 17 Sep 2016
UFO Moviez
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 12
UFO is leveraging its current infrastructure on new business models such as Caravan Talkies - a sun down
show in media dark areas, which would be a source of advertisement revenues. The company is targeting a
van fleet of 300 from 80 currently and expects traction owing to the novelty of the offering. The segment,
which commands 9-10x premium to in-cinema ad rates is expected to aid margins.
Distribution income
UFO delivers movie content through (i) satellite-based cinema distribution network using UFO-M4 platform
and (ii) D-Cinema network. It currently has a 54% distribution screen market share in India with ~4940
screens on its network. As the company was able to consolidate its position by adding a number of screens
on its network, its distribution revenues has grown at 40% CAGR over FY12-15. Multiplexes like PVR and
INOX are adding up to about 60-70 screens per year while the segment is directly correlated to the number
of screens in its kitty.
Exhibitor rental and sales business
UFO earns rental revenue from renting, either directly or through its franchisees, of its digital cinema
equipment to exhibitors for use on their premises. The income comes in two forms: lease and sale. The non-
DCI (Digital Cinema Initiative) equipment are fixed-periodic fee contracts based on 10 years with the option
to terminate for convenience only after four years. In the D-Cinema business, exhibitors rent D-Cinema
servers and projectors, under contracts for a fixed-monthly fee. The company also sells digital cinema
equipment, as well as related consumables.
The process of digitization picked up in India in 2005-06 when UFO entered the Indian movie Industry after it
deployed its proprietary UFO M4 technology. The content owners could now digitally reach a large number of
theaters on the UFO M4 platform, after making a usage based fee payment to UFO. Digital cinema began to
eclipse analog prints starting 2005-06, physical prints faced obsolescence and were eliminated by 2013 in
India. The digitisation of cinema infused new life into the Film Industry. The cost of digitally reaching theaters
was significantly lower than the cost of analog prints. Movies started releasing simultaneously in theatres
across the country ensuring higher revenue collection for content owners. UFO’s digitisation and delivery
model and its UFO M4 platform has been a key driver of the digital revolution which the Indian Film industry
witnessed in the past decade. Directly and indirectly, UFO has played an unseen but significant role in
enhancing the Indian movie industry in quantity and quality.
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 13
During the fiscal year 2016, UFO digitally delivered 1,738 movies in 25 languages to 5,034 screens with an
aggregate seating capacity of approximately 2.15mn viewers spread across 30 States and Union territories in
India and in Nepal. Since the beginning of its operations, UFO has digitally delivered more than 10,500
movies in India as at March 31, 2016. As on March 31, 2016, UFO’s global network spans 6,689 screens
worldwide, which includes 1,655 screens across the Middle East, Israel, Mexico and the USA in addition to
screens in India and Nepal mentioned above. UFO, through its theatrical service offerings, adds value to all
stakeholders in the cinema value chain, as depicted above:
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 14
UFO operates India’s largest satellite-based, digital cinema distribution network in terms of the number of
screens using its UFO-M4 platform, as well as India’s largest D-Cinema network in terms of the number of
screens. Your Company relays / delivers movies to theatres across the country in MPEG 4 format, using
satellites (E-Cinema), as well as in JPEG 2000 (D-Cinema) format using physical devices through its
subsidiary Scrabble Entertainment Limited.
To further propel the growth in the foreseeable future, Company has introduced new strategic initiatives like
Caravan Talkies, NOVA CINEMAS and hyper-local advertising solution - UFO Framez mainly driven by
innovation.
UFO-M4 Technology
UFO-M4 is your Company’s satellite-based, E-Cinema movie delivery technology platform. UFO-M4
technology platform provides an end-to-end platform for the satellite delivery of movies. UFO-M4 technology
compresses and encrypts digital movie files prior to distributing them across UFO’s satellite based network.
Caravan Talkies and Club Cinema
Caravan Talkies, housed in Valuable Digital Screens Private Limited (VDSPL), a subsidiary of your Company,
provides movie screenings with low capital expenditure in the under-penetrated, media-dark areas of rural
India through its cinema-on-wheels solution, creating a unique opportunity for advertisers to reach captive
audiences. Currently, movies are screened free to viewers and Caravan Cinema derives its revenues through
advertising. This is an effective advertisement platform for companies targeting rural markets. Club Cinema
provides movie screenings of recently released films in clubs and community centers at private screens, such
as remote industrial townships, corporate auditoriums and educational institutions. By providing a complete
digital cinema solution to such customers, UFO is able to reach an untapped and niche segment of the Indian
exhibition sector.
NOVA CINEMAS
VDSPL, under the NOVA CINEMAS brand, is encouraging local entrepreneurs to own and operate NOVA
CINEMAS branded theatres in various part of the country. VDSPL also grant rights to use the brand ‘NOVA
CINEMAS’ to the local entrepreneurs for a fee, and will take end to end responsibility of providing theatrical
technologies as well as sourcing of film content. Under this asset light initiative, VDSPL aims to recreate the
screen growth in non-metro regions across India. Currently, NOVA CINEMAS has shortlisted 3 franchisees
with 2 screens each, one each from Maharashtra, Gujarat and Punjab. These screens are expected to be
operational during the fiscal year 2016-17. NOVA CINEMAS is also in negotiation with 4 franchisees in
Maharashtra and Punjab. Further, it has received notable number of enquiries from other parts of India.
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 15
Expect robust growth momentum with ~13% revenue and 25% PAT cagr over FY16-18E
UFO has posted revenue and PAT cagr of 16% and 7% respectively over FY14‐16 and we expect growth
momentum to continue with ~13% and 25% cagr respectively over FY16‐18E driven by growth from Ad
Revenues and content owners’ revenue. We expect margins to ramp up slowly to ~32%. At the current
market price of Rs465, the stock trades at ~13x FY18E EPS. We like the underlying business contours such
as strong revenue growth coupled with stable margin profile and healthy free cash flows and RoE/RoCE of
~20‐25%. We believe UFO has got upside potential given the accompanying business fundamentals. We
initiate as BUY on the stock at Rs465 and add on declines to Rs430 and with price targets of Rs510 and
Rs555 over the next 3-4 quarters.
Key risks:
Slower-than-expected pick up in in-screen ads, and Alternate technologies disrupting UFO’s movie delivery
model
Financial Summary (Rs cr)
FY14 FY15 FY16 FY17E FY18E
Net Sales 425 480 571 638 730
EBITDA 133 161 183 194 228
PAT 51 47 59 66 93
EPS (Rs) 19.8 18.1 22.8 25.5 35.8
P/E (x) 24.2 26.4 21.0 18.8 13.4
EV / EBITDA (x) 9.4 7.7 6.8 6.4 5.5
RoE (%) 13.4 10.8 12.0 12.1 16.2
Source: Company, HDFC sec Research
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 16
Revenue to post 13% cagr over FY16-18E
425480
571638
730
100
200
300
400
500
600
700
800
900
1000
FY14 FY15 FY16 FY17E FY18E
Rs
Cr
Source: Company, HDFC sec Research
EBITDA and PAT to witness strong momentum
25
75
125
175
225
275
FY14 FY15 FY16 FY17 FY18E
EBITDA PAT
Source: Company, HDFC sec Research
Return Ratios (RoE/RoCE) (%)
0.0
5.0
10.0
15.0
20.0
25.0
FY15 FY16 FY17E FY18E
RoE RoCE
Source: Company, HDFC sec Research
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 17
Advertisement revenues trend
100
117
158
191
230
50
150
250
FY14 FY15 FY16 FY17E FY18E
Rs
Cr
Source: Company, HDFC sec Research
Operating Cash Flow (Rscr) to witness Uptick
138129
96
121
137
50
100
150
200
FY14 FY15 FY16 FY17E FY18E
Source: Company, HDFC sec Research
Revenue Split (%)
47.2
52.0 52.2
46.9 45.4 44.4
32.2
24.2 22.724.5 24.7 24.1
20.6
23.825.1
28.6 29.9 31.5
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
55.0
FY13 FY14 FY15 FY16 FY17E FY18E
Rev From Content Owners Rev from Exhibitors Advertisement
Source: Company, HDFC sec Research
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 18
Income Statement (Consolidated)
(Rs Cr) FY14 FY15 FY16 FY17E FY18E
Net Revenue 425 480 571 638 730
Growth (%) 26.0 13.0 19.0 11.8 14.3
Operating Expenses 292 319 388 444 501
EBITDA 133 161 183 194 228
Growth (%) 22.1 21.3 13.9 5.7 17.8
EBITDA Margin (%) 31.2 33.5 32.1 30.4 31.3
Depreciation 64 77 77 78 74
EBIT 69 84 106 116 155
Other Income 1 1 2 7 9
Interest 20 20 14 17 15
PBT 50 65 94 106 149
Tax -1 18 35 40 52
RPAT 51 47 59 66 93
Growth (%) 35.7 -8.4 25.8 12.1 40.0
EPS 19.8 18.1 22.8 25.5 35.8
Source: Company, HDFC sec Research
Balance Sheet (Consolidated)
(Rs Cr) FY14 FY15 FY16 FY17E FY18E
SOURCE OF FUNDS
Share Capital 26 26 26 26 26
Reserves 371 427 489 527 588
Shareholders' Funds 412 460 526 564 631
Long term Debt 100 56 44 34 53
Net Deferred Taxes -12 -19 -28 -28 -28
Other current Liabs 44 57 49 52 70
Long Term Provisions & Others 1 1 1 5 5
Total Source of Funds 545 554 592 627 732
APPLICATION OF FUNDS
Net Block 361 311 295 288 277
Goodwill 133 168 172 172 172
Investment 5 6 8 21 44
Long Term Loans & Advances 42 53 48 62 88
Total Non-Current Assets 541 538 523 543 581
Inventories 10 11 12 14 16
Trade Receivables 91 105 152 173 200
Cash & Equivalents 52 58 67 72 98
Other Current Assets 27 37 64 86 142
Total Current Assets 180 211 294 345 456
Trade Payables 48 66 89 96 105
Other Current Liab & Provisions 134 134 139 154 192
Total Current Liabilities 183 200 228 250 296
Net Current Assets -3 12 66 96 160
Total Application of Funds 545 554 592 627 732 Source: Company, HDFC sec Research
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 19
Cash Flow Statement (Consolidated) (Rs Cr) FY14 FY15 FY16 FY17E FY18E
Reported PBT 50 65 94 106 149
Non-operating & EO items -1 -1 -2 -7 -9
Interest Expenses 20 20 14 17 15
Depreciation 64 77 77 78 74
Working Capital Change 4 -14 -53 -25 -37
Tax Paid 1 -18 -35 -40 -52
OPERATING CASH FLOW ( a ) 138 129 96 128 139
Capex -145 -27 -64 -63 -67
Free Cash Flow -7 102 32 66 73
Investments -3 -1 -2 -13 -23
Non-operating income 1 1 2 7 9
INVESTING CASH FLOW ( b ) -147 -27 -64 -69 -81
Debt Issuance / (Repaid) 31 -44 -12 -10 19
Interest Expenses -20 -20 -14 -17 -15
FCFE 4 38 5 38 76
Share Capital Issuance 0 0 0 0 0
Dividends -1 -2 -24 -27 -36
Financing Cash Flow 10 -66 -51 -55 -33
Net Cash Flow (a+b+c) 0 36 -19 5 26 Source: Company, HDFC sec Research
Key Ratio (Consolidated)
Key Ratios (%) FY14 FY15 FY16 FY17E FY18E
EBITDA Margin 31.2 33.5 32.1 30.4 31.3
EBIT Margin 16.3 17.5 18.6 18.2 21.2
APAT Margin 12.1 9.8 10.3 10.4 12.7
RoE 13.4 10.8 12.0 12.1 16.2
RoCE 13.6 14.9 17.8 18.3 21.9
Solvency Ratios
Net Debt/EBITDA 0.9 0.4 0.1 -0.2 -0.4
Net D/E 0.3 0.1 0.0 -0.1 -0.1
Interest Coverage 6.7 8.1 12.8 11.1 15.0
Per Share Data
EPS 19.8 18.1 22.8 25.5 35.8
CEPS 44.3 47.9 52.7 55.5 64.1
BV 159.0 177.6 202.9 217.8 243.8
Dividend 0.0 0.0 8.0 9.0 12.0
VALUATION
P/E 24.2 26.4 21.0 18.8 13.4
P/BV 3.0 2.7 2.4 2.2 2.0
EV/EBITDA 9.4 7.7 6.8 6.4 5.5
EV / Revenues 2.9 2.6 2.2 2.0 1.7
Dividend Yield (%) 0.0 0.0 1.7 1.9 2.5 Source: Company, HDFC sec Research
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 20
100.0
200.0
300.0
400.0
500.0
600.0
700.0
Sep
-15
Oct
-15
No
v-1
5
De
c-1
5
Jan
-16
Feb
-16
Mar
-16
Ap
r-1
6
May
-16
Jun
-16
Jul-
16
Au
g-1
6
Sep
-16
Price History
Rating Definition:
Buy: Stock is expected to gain by 10% or more in the next 1 Year. Sell: Stock is expected to decline by 10% or more in the next 1 Year.
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 21
Industry CMP Recommendation Buying Range Target Time Horizon
Broadcasting & Cable TV Rs. 85 BUY Rs. 85 - 74 Rs. 99 - 117 3-4 quarters
HDFC Scrip Code BALTEL
BSE Code 532382
NSE Code BALAJITELE
Bloomberg BLJT IN
CMP as on 16 Sep’16 85
Equity Capital (Rs Cr) 15.2
Face Value (Rs) 2
Equity O/S (Cr) 7.6
Market Cap (Rs cr) 645
Book Value (Rs) 69
Avg. 52 Week Volumes
288109
52 Week High 150
52 Week Low 83
Shareholding Pattern (%)
Promoters 40.9
Institutions 23.4
Non Institutions 35.7
Kushal Rughani [email protected]
Balaji Telefilms Ltd established in 1994, has emerged as one of the leading providers of
entertainment in India. The company is primarily engaged in the production of television content
across five languages (Hindi, Telugu, Tamil, Malayalam and Kannada) and have produced > 100
shows till date. Balaji Telefilms has set a benchmark in television programming and was one of
the very first organizations to venture into the Hindi General Entertainment Channel (GEC) and
regional GEC space. Balaji has specialised in formatted programming that can be adapted for
languages around the nation as well as abroad. One notable success has been Kyunki Saas Bhi
Kabhi Bahu Thi known as the master of all Indian soap operas and also for setting a golden
period on Indian television. Other examples include Kahaani Ghar Ghar Kii, Kasautii Zindagii
Kay, Bade Acche Lagte Hain, Kya Hua Tera Vaada, and Jodha Akbar etc. In recent years company
has been expanding its reality shows output with shows such as titles such as Box Cricket
League on Sony TV. Balaji has posted subdued performance with revenues declined from
Rs407cr to Rs293cr in FY16 owing to less contribution from Movies segment. Balaji’s Television
revenue has posted robust revenue growth as it increased from Rs135cr (FY14) to Rs270cr in
FY16. We expect robust growth momentum with ~40% revenue cagr along with strong
turnaround in operating margin profile from operating loss of Rs22cr in FY14 to Rs45cr EBITDA
in FY18E. The stellar operating performance would drive profitability as we expect bottom line to
grow almost two and half fold over FY16-18E to Rs44cr. Company had raised ~Rs150cr through
preferential allotment at ~Rs140 in March 2016. We believe ALT could be game changer for the
company over the next 3-5 years. We believe company would post strong revenue growth along
with strong turnaround in operational performance and that in turn would drive profit growth.
By 2020, company targets revenue splits to be evenly distributed between TV, Movies and
Digital. By 2025, management aims Digital platform to be much bigger than Movies and TV
business. At the current market price of Rs85, the stock trades at attractive ~15x FY18E EPS and
It is to be noted that company is virtually debt free along with that it had cash and equivalents
of Rs188cr as on FY16. We assign PE of 20x on FY18E basis and initiate as BUY on the stock at
Rs85 and add on dips till Rs74 with target price of Rs99 and Rs117 over the next 12 months.
INVESTMENT IDEA 17 Sep 2016
Balaji Telefilms
PCG RESEARCH
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 22
Investment Rationale
Balaji Telefilms: Overview
Balaji Telefilms has a strong track record of producing quality content for Hindi GEC’s and have successfully
produced over 15,000 hours of television content in Hindi, Tamil, Telugu, Kannada, Malayalam and Bengali
entertainment genre. Programs produced and created by the company has gained immense popularity in the
past. Creativity and understanding the need of the audience has been the core reason for the popularity of
Balaji’s serials. We believe the company will continue to produce quality content for mass viewers and will be
able to reap the benefits of digitization and increased demand for creative content. Balaji’s business model
saw a paradigm shift with its venture into movies. Nevertheless, the quality of content for television was
never compromised. Besides, Balaji possesses 23 modern sets and 37 editing suites in India. The company
also has a presence in the Indian movies segment, with activities ranging from production to distribution of
films under their motion pictures banner and 100% subsidiary Balaji Motion pictures Ltd. Despite being a
relatively new player in this segment, the firm has managed to garner a formidable degree of recognition
from the established studios. As of today Balaji has been able to carve a niche for itself in the media and
entertainment sector by consistently delivering top quality content to a vast diverse audience all over India.
Now, ALT Digital is gearing up as Balaji’s first large-scale consumer facing brand. It will enable Balaji to step
into the consumer business – into the futuristic digital space by leveraging its core creative expertise.
Through ALT Digital, company would be able to build a strong and valuable B2C brand.
ALT Digital to be game changer for the company
Company had raised Rs150cr by issuing shares via preferential allotment to 5 marquee investors at ~Rs140
in March 2016. The promoters holding fell to 40.9% after the share issuance. The proceeds would be used for
ALT Digital Media Entertainment – the foray into B2C digital content business segment. ALT will create its
own differentiated, original digital content platform for the connected ecosystem including gaming, tablets,
smart TV etc. With this Rs150cr company is on a fast track to roll out ALT Digital OTT platform. The company
has high cash and cash equivalents of Rs190cr as on FY16 (25% of market cap), which is invested in mutual
funds; as company would spend money in ALT its cash position will reduce to Rs70cr in FY18E. ALT Digital is
currently in prelaunch phase with expenses mainly account of content, technology etc. The company has so
far invested ~Rs20cr in the digital foray and aims to spend Rs250-300cr over the next 3 years. Management
expects the launch of ALT Digital during 2017. Digital is the way forward and the whole space is growing very
fast. By 2020, company targets revenue splits to be evenly distributed between TV, Movies and Digital. By
2025, management aims Digital platform to be much bigger than Movies and TV business.
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 23
Increasing Mobile, Broadband penetration to drive growth momentum
India is likely to witness a data revolution in the coming future, which holds good for all content rich
businesses. The delivery platforms would be amplified creating more demand for the content. Mobile wireless
internet users have already reached about 230 million users at the end of March 2014 and the number is
expected to group dramatically. Also, when compared to the global level, India imported the highest number
of smart phones. With the launch of several OTT applications and mobile applications, people can
conveniently watch videos on their cell phones. This opens up more avenues for the delivery of content. TV
Today’s news would also reach such additional platforms, which would open up new avenues for revenue
growth.
Building a strong B2C Brand through ALT
ALT Digital will be Balaji’s first large-scale consumer facing brand. It will enable Balaji to step into the
consumer business – into the futuristic digital space by leveraging its core creative expertise. Through ALT
Digital, company aims to build a strong and valuable B2C brand. The motive is to create value for the group
by redefining the terms of Intellectual Property (IP) ownership and exploiting new avenues of monetisation.
The platform will be a tech play that will enable Balaji to cater to the digital content consumer and creatively
expand from what we specialise in. It will create differentiated, original digital content for 32 different
interfaces spanning mobiles, computers, laptops, tablets, smartphones, game stations, or use an HDMI cable
to mirror the high resolution content on Internet ready TV sets. The content will be available across 9
different speed profiles. We have set up a strong team of highly talented professionals for the digital vertical.
The move reflects the Group’s strategic intent to expand its entertainment expertise by creating enjoyable
and engaging content for a universal audience – those in India and overseas.
The Movies Value Chain
The movie value chain involves producer who produces the content, distributor who distributes the content
from producers to exhibitors and exhibitors including single screen and multiplexes who display content to
viewers. The content moves from producers to exhibitors while revenue flows in the reverse direction. The
box office collection received are shared in various ways between producers, distributors and exhibitors.
Generally multiplexes share 50% of net box office collections with the distributor in the first week, 42.5% in
the second, 37.5% in the third and 30% from the fourth week onwards. In case of single multiplex and single
screen theatres exhibitors share up to ~60% of the net collections with the distributor due to high bargaining
power. Movies business will also drive revenues for the company. We believe movie business solely depends
upon the collections it earn and that drives performance for Balaji Motion Pictures.
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 24
Balaji Telefilms to reap benefits maximum benefits by distributing films
The company was not into distribution till 2012 and used to sell its movies to distributors based on all the
models mentioned above. The company followed the minimum guarantee plus royalty model for “The dirty
picture”, which was a super hit and lost opportunity in terms of potential revenues. The company now
distributes all its films across the Mumbai, and Delhi territories, which account for 50% of the total theatrical
revenues and reap maximum benefits. We believe that the strategy is a bit risky but will lead to outstanding
profits if any movie become a super hit. Out of the 6 movies to be released in 2013 “Shootout at Wadala”
and “Once upon a time in Mumbai 2” were hit movies. Recently company released the movies such as Udta
Punjab and Kya Kool Hain Hum 3, which got good response from viewers.
In the movies business, Company leveraged its franchise value by exploring a sequel and released the adult
comedy Kya Kool Hain Hum-3 in January 2016. In FY17 so far, Balaji Motion has released three movies – the
biopic Azhar, Udta Punjab and the comic caper Great Grand Masti. Two more movies such as – Super Singh
and Half Girlfriend. For FY2017 and FY2018, Company has a slate of 4-5 movies across diverse concepts,
genres and budgets. Balaji aims to emerge as one of the top 3 movie production houses in India, with a
strategic thrust on sequels, and exploring different models of production.
The key difference between a co-produced film and a self-produced film is that the production line
responsibility lies with the co-producer. Typically, once the star cast, budget, script and expected cash
outflow is decided by both Balaji and the co-producer, the co-producer takes the lead in production and
execution. In return Balaji gets to keep the distribution rights and the intellectual property rights of the film.
Also, the company shares revenue in a pre-decided proportion with the co-producer once they recover the
entire cost of the movie including the distribution and marketing cost along with an additional commission for
their investment. The sharing in profits of generally 50:50 in the co-production model but could vary in
certain cases. This model awards both the producers and film makers which result in a quality content and
provides scalability.
Top Executive hiring
Balaji has hired executives from Sony and Viacom18 to lead its digital content unit. In December, it
appointed former Sony Entertainment Television executive Nachiket Pantvaidya as the CEO of ALT Digital.
Last month, it named Ekalavya Bhattacharya, who was earlier with Viacom18, the unit’s chief strategy
officer.
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 25
Forecast Robust ~40% revenue cagr over FY16-18E along with strong turnaround in Operational
performance
Balaji has posted subdued performance with revenues declined from Rs407cr to Rs293cr in FY16 owing to
less contribution from Movies segment. Balaji’s Television revenue has posted robust revenue growth as it
increased from Rs135cr (FY14) to Rs270cr in FY16. We expect robust growth momentum with ~40% revenue
cagr along with strong turnaround in operating margin profile from operating loss of Rs22cr in FY14 to
Rs45cr EBITDA in FY18E. The stellar operating performance would drive profitability as we expect bottom line
to grow almost two and half fold over FY16-18E to Rs44cr. At the current market price of Rs85, the stock
trades at ~15x FY18E EPS and company is virtually debt free along with that it had cash and equivalents of
Rs188cr as on FY16. Company had raised ~Rs150cr through preferential allotment to qualified investors at
~Rs140 in March 2016. The money were raised for investment in ALT Digital platform; gradually company
will invest in the same. Earlier than expected launch and sharp ramp up in revenues from ALT Digital and
would be key positives for the stock. We believe ALT could be game changer for the company over the next
3-5 years. We believe company would post strong revenue growth along with strong turnaround in
operational performance and that in turn would drive profit growth. We assign PE of ~20x on FY18E basis
and initiate as BUY on the stock at Rs85 and add on dips till Rs74 with target price of Rs99 and Rs117 over
the next 12 months.
Key Risks
Any delay in launch of ALT Digital would impact the growth prospects which would in turn negative for
the stock.
Balaji Motion financials heavily depend upon movies that company make and release; the weak movie
collection could impact revenue and profitability.
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 26
Financial Summary (Rs cr)
FY14 FY15 FY16 FY17E FY18E
Net Sales 407 347 293 422 578
EBITDA -22 7 7 17 45
PAT -17 6 3 19 44
EPS (Rs) -2.3 0.8 0.4 2.5 5.8
P/E (x) -38.9 108.6 204.5 35.6 15.1
EV / EBITDA (x) -29.8 98.5 97.5 39.2 14.6
RoE (%) -4.4 1.6 0.7 3.4 7.7 Source: Company, HDFC sec Research
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 27
Revenue trend (Consolidated)
407
347
293
422
578
100
200
300
400
500
600
700
FY14 FY15 FY16 FY17E FY18E
Rs
Cr
Source: Company, HDFC sec Research
EBITDA and PAT to witness strong momentum (Rscr)
-30
-20
-10
0
10
20
30
40
50
FY13 FY14 FY15 FY16 FY17 FY18E
EBITDA PAT
Source: Company, HDFC sec Research
Segmental revenues projection (Rscr)
50
100
150
200
250
300
350
400
450
500
FY13 FY14 FY15 FY16 FY17E FY18E
Balaji Tele Balaji Motion (Movies) + Others
Source: Company, HDFC sec Research
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 28
Balaji (Standalone) Revenues
50
100
150
200
250
300
350
FY13 FY14 FY15 FY16
Rs
Cr
Source: Company, HDFC sec Research
Balaji Standalone Business remains in Profit
5
10
15
20
25
30
35
40
45
50
FY13 FY14 FY15 FY16
Rs
Cr
Source: Company, HDFC sec Research
Realisations per Hour
0
5
10
15
20
25
30
35
FY13 FY14 FY15 FY16
Rs
lakh
s
Source: Company, HDFC sec Research
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 29
Income Statement (Consolidated)
(Rs Cr) FY14 FY15 FY16 FY17E FY18E
Net Revenue 407 347 293 422 578
Growth (%) 119.0 -14.8 -15.6 43.9 37.1
Operating Expenses 429 340 286 405 533
EBITDA -22 7 7 17 45
Growth (%) -376 -130.3 1.1 148.5 169.5
EBITDA Margin (%) -5.4 1.9 2.3 3.9 7.7
Depreciation 6 8 9 10 12
EBIT -28 -2 -3 7 32
Other Income 18 11 22 28 34
Interest 1 0 0 0 0
PBT -11 9 19 35 66
Tax 6 3 16 17 25
RPAT -17 6 3 19 44
Growth (%) -219 -135.8 -47 474.8 135.4
EPS -2.3 0.8 0.4 2.5 5.8
Source: Company, HDFC sec Research
Balance Sheet (Consolidated)
(Rs Cr) FY14 FY15 FY16 FY17E FY18E
SOURCE OF FUNDS
Share Capital 13 13 15 15 15
Reserves 370 369 509 513 536
Shareholders' Funds 383 382 524 529 551
Long term Debt 8 1 5 5 5
Net Deferred Taxes -3 -6 -7 -9 -9
Other current Liabs 19 3 13 20 25
Long Term Provisions & Others 0 0 0 0 0
Total Source of Funds 419 411 535 545 572
APPLICATION OF FUNDS
Net Block 23 27 35 49 73
Intangibles 1 2 2 2 2
Investment 37 32 32 43 52
Long Term Loans & Advances 66 64 78 82 87
Total Non-Current Assets 126 125 147 176 214
Inventories 70 30 119 103 147
Trade Receivables 39 67 81 96 135
Cash & Equivalents 8 11 17 40 28
Other Current Assets 190 191 228 221 162
Total Current Assets 307 299 445 459 467
Trade Payables 31 36 56 62 74
Other Current Liab & Provisions 22 11 18 28 35
Total Current Liabilities 53 47 73 90 110
Net Current Assets 293 252 372 369 357
Total Application of Funds 419 411 535 545 572 Source: Company, HDFC sec Research
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 30
Cash Flow Statement (Consolidated) (Rs Cr) FY14 FY15 FY16 FY17E FY18E
Reported PBT -11 9 19 35 66
Non-operating & EO items -18 -11 -22 -28 -34
Interest Expenses 1 0 0 0 0
Depreciation 6 8 9 10 12
Working Capital Change 33 4 -114 54 6
Tax Paid -6 -3 -16 -17 -25
OPERATING CASH FLOW ( a ) -13 -2 -138 53 26
Capex -1 -16 -15 -34 -49
Free Cash Flow 4 -8 -139 19 -22
Investments -5 5 0 -11 -9
Non-operating income 18 11 22 28 34
INVESTING CASH FLOW ( b ) 12 0 7 -17 -23
Debt Issuance / (Repaid) 0 0 0 0 0
Interest Expenses -1 0 0 0 0
FCFE 3 -8 -139 19 -22
Share Capital Issuance 0 0 2 0 0
Dividends -4 -5 -11 -13 -20
Financing Cash Flow -6 -6 -9 -13 -20
Net Cash Flow (a+b+c) -6 -8 -139 23 -16 Source: Company, HDFC sec Research
Key Ratio (Consolidated)
Key Ratios (%) FY14 FY15 FY16 FY17E FY18E
EBITDA Margin -5.4 1.9 2.3 3.9 7.7
EBIT Margin -6.8 -0.5 -0.9 1.6 5.6
APAT Margin -4.2 1.8 1.1 4.5 7.7
RoE -4.4 1.6 0.7 3.4 7.7
RoCE -7.1 -0.4 -0.6 1.3 6.0
Solvency Ratios
Net Debt/EBITDA 7.3 -23.5 -27.4 -10.1 -1.9
Net D/E -0.4 -0.4 -0.3 -0.3 -0.2
Interest Coverage -15.6 19.4 - 110.5 297.8
Per Share Data
EPS -2.3 0.8 0.4 2.5 5.8
CEPS -1.7 2.2 1.7 3.8 7.5
BV 50.4 50.3 69.0 69.6 72.5
Dividend 0.4 0.6 1.2 1.5 2.2
VALUATION
P/E -38.9 108.6 204.5 35.6 15.1
P/BV 1.7 1.8 1.3 1.3 1.2
EV/EBITDA -29.8 98.5 97.5 39.2 14.4
EV / Revenues 1.6 1.9 2.2 1.5 1.1
Dividend Yield (%) 0.5 0.7 1.4 1.7 2.5 Source: Company, HDFC sec Research
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 31
50
75
100
125
150
175
Sep
-15
Oct
-15
No
v-1
5
De
c-1
5
Jan
-16
Feb
-16
Mar
-16
Ap
r-1
6
May
-16
Jun
-16
Jul-
16
Au
g-1
6
Sep
-16
Price History
Rating Definition:
Buy: Stock is expected to gain by 10% or more in the next 1 Year. Sell: Stock is expected to decline by 10% or more in the next 1 Year.
PCG RESEARCH
Private Client Group - PCG RESEARCH P a g e | 32
I, Kushal Rughani, MBA, author and the name subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest. Any holding in stock – No Disclaimer: This report has been prepared by HDFC Securities Ltd and is meant for sole use by the recipient and not for circulation. The information and opinions contained herein have been compiled or arrived at, based upon information obtained in good faith from sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. This document is for information purposes only. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete and this document is not, and should not be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments. 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