Visit http://indiaer.blogspot.com/ for complete detailsUTV Software
Communications Ltd
Sub-Par 2QF11 Result But
Future Trends Looking
Brighter; Stay OW
We maintain our OW rating on UTV since we feel that
the planned release of a) console game El Shaddai and
b) high budget films like Guzarish and Tees Maar Khan
in 2HF11 will likely lead to meaningful earnings surprise
for the Street. We believe UTV, with its diversified model
with leadership in all its businesses, looks well set for a
strong growth trajectory on a 2-3 year view.
What's new: UTV delivered 2QF11 consolidated PAT of
Rs.402m, a swing of 383% compared to 2QF10 though
2.6% lower than 1QF11. EBIT of Rs.454 m was about
24% below our expectation primarily due to lower than
expected contribution from films division. EBITDA
margin of 18.4% was marginally lower than for the
previous quarter but is in line with our expectations for
FY11. 1HF11 EBIT is about 41% of our full year F11
expectations
Movie division moderately below expectations: This
segment reported EBIT of Rs447m, down 14% QoQ
though up 50% YoY contributing about 82% of UTV’s
consolidated EBIT. Given the success of movies like I
hate Luv Storys, Udaan, Peepli Live and We are Family
released in 2QF11 and the monetization of the Satellite
TV rights of Rajneeti, this was slightly lower than our
expectation. However with the strong movie slate and
with growing proportion of non-theatrical revenues, we
believe 2HF11 should see an earnings rebound for this
business.
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