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Eros International Media
Revenue drivers remain strong
Box-office drivers remain strong, with 5-9% yoy ticket price hikes in 3Q11 and
30% screen adds in FY11 for PVR/Cinemax. Eros revenues grew 87% yoy in 3Q11
even as the industry box office collections shrunk. The stock looks cheap at 9x
FY12F EPS (+25% yoy), with upside risk to our revenue forecasts
Multiplex revenue drivers in place: rise in average ticket prices and screen expansion
Average ticket prices are up 5% yoy at PVR and 9% at Cinemax multiplexes. Rapid screen
expansion continues: PVR and Cinemax plan to add 51 screens in all in 4Q, a 30% FY11
rise, in line with average FY07-10 multiplex industry screen growth. These trends support our
6% FY11-13 CAGR forecast for box-office collections for big-ticket Hindi releases.
Industry revenues somewhat sluggish, as occupancy levels took a hit
Combined exhibition revenues from large multiplex chains – PVR, Cinemax, Fame and Inox
(we exclude Reliance from our analysis, as it also has international operations) – were up a
modest 3% yoy during 3Q11. Occupancy rates were significantly weaker yoy (-910bp/
-300bp for PVR/Cinemax), which were partly offset by higher yoy ticket realisations.
Eros outgrew the industry due to de-risked model and good box office performance
For the top 50 releases annually (as per estimates of trade website ibosnetwork.com), 3Q11
revenues were down 1% yoy. However, excluding two of the biggest all-time grossers (3
Idiots in 3Q10 and Robot in 3Q11), revenues were down 15% yoy. We attribute this to the
poor performance of many high-profile releases relative to 3Q10. In contrast, Eros posted
86.8% yoy revenue growth. This underscores its de-risked model of leveraging end-to-end
rights (box-office, satellite, international, music, digital and catalogue). Also, Eros saw decent
success for its key releases in 3Q, Golmaal-3 and No Problem.
Sitting on the largest-ever release slate, FY12 outlook is encouraging
Eros has said it plans to release at least six big-budget titled Hindi releases, and potentially
two big as-yet-untitled ones. It also recently bagged co-production rights of Rana, featuring
south India’s topmost actor, Rajnikanth. We see upside risk to our FY12F revenue growth of
25% for any additional film (untitled projects, potential acquisitions) and Rana (which goes on
the floors in March) released that year. We believe Eros offers the best pure-play exposure
to the film entertainment sector in India and an attractive entry point at 9x our FY12F EPS.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Eros International Media
Revenue drivers remain strong
Box-office drivers remain strong, with 5-9% yoy ticket price hikes in 3Q11 and
30% screen adds in FY11 for PVR/Cinemax. Eros revenues grew 87% yoy in 3Q11
even as the industry box office collections shrunk. The stock looks cheap at 9x
FY12F EPS (+25% yoy), with upside risk to our revenue forecasts
Multiplex revenue drivers in place: rise in average ticket prices and screen expansion
Average ticket prices are up 5% yoy at PVR and 9% at Cinemax multiplexes. Rapid screen
expansion continues: PVR and Cinemax plan to add 51 screens in all in 4Q, a 30% FY11
rise, in line with average FY07-10 multiplex industry screen growth. These trends support our
6% FY11-13 CAGR forecast for box-office collections for big-ticket Hindi releases.
Industry revenues somewhat sluggish, as occupancy levels took a hit
Combined exhibition revenues from large multiplex chains – PVR, Cinemax, Fame and Inox
(we exclude Reliance from our analysis, as it also has international operations) – were up a
modest 3% yoy during 3Q11. Occupancy rates were significantly weaker yoy (-910bp/
-300bp for PVR/Cinemax), which were partly offset by higher yoy ticket realisations.
Eros outgrew the industry due to de-risked model and good box office performance
For the top 50 releases annually (as per estimates of trade website ibosnetwork.com), 3Q11
revenues were down 1% yoy. However, excluding two of the biggest all-time grossers (3
Idiots in 3Q10 and Robot in 3Q11), revenues were down 15% yoy. We attribute this to the
poor performance of many high-profile releases relative to 3Q10. In contrast, Eros posted
86.8% yoy revenue growth. This underscores its de-risked model of leveraging end-to-end
rights (box-office, satellite, international, music, digital and catalogue). Also, Eros saw decent
success for its key releases in 3Q, Golmaal-3 and No Problem.
Sitting on the largest-ever release slate, FY12 outlook is encouraging
Eros has said it plans to release at least six big-budget titled Hindi releases, and potentially
two big as-yet-untitled ones. It also recently bagged co-production rights of Rana, featuring
south India’s topmost actor, Rajnikanth. We see upside risk to our FY12F revenue growth of
25% for any additional film (untitled projects, potential acquisitions) and Rana (which goes on
the floors in March) released that year. We believe Eros offers the best pure-play exposure
to the film entertainment sector in India and an attractive entry point at 9x our FY12F EPS.
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