Balaji Telefilms – 2QFY11 results below expectation:: JM Financials

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First Cut – 2QFY11 results below expectation
􀂄 Revenue better than expected, EBITDA margin in deep red: At `382mn
(down 6.2% YoY), 2QFY11 standalone revenues came in better than JMFe of
`362mn; but EBITDA margin at -13.5% was significantly below JMFe of -5%.
Initial launch expenses for new shows under commissioned model impacted
overall EBITDA margin. 2QFY11 net profit came in at -`64mn vs -`23mn JMFe,
primarily due to dismal performance at operating profit front. 2QFY11
standalone EPS stood at -`1.0 vs `0.2 in 2QFY10 and `0.4 in 1QFY11.


􀂄 Key highlights of the quarter: 1) Average realisation from commissioned
programming increased to `1.9 in 2QFY11 from `1.8 in 1QFY11, 2) cash and
cash equivalents stood at `1.9bn as on 30th Sept, 2010, translating into cash
per share of c.`29, 3) 2QFY11 witnessed launch expenses of `27.4mn on new
business of Education & New Media Divisions.


􀂄 Maintain SELL: We would review the TP and earning estimates for Balaji post
our interaction with its management over the next few days. We hope to
secure inputs on key operating metrics including 1) show pipeline, 2) outlook
on realisation per hour, 3) cost of production, and 4) other income. We
maintain our SELL rating on the stock. At CMP of `51, the stock is trading at
32.3x FY11E EPS of `1.6 and 15.3x FY12E EPS of `3.3.