We rate Eros International Media Limited (Eros) a ‘STRONG BUY’. Our rating
underpins the company’s strategized business model, continued expansion of
content library, strong distribution network and initiatives to enhance revenues
through new business avenues. However, piracy of content and the
government’s plans to launch uniform tax impedes our optimism a bit.
Investment Case
Eros’ business model enables it to monetize films from pre-sale to post
theatrical stages. Furthermore, the company possesses the Intellectual
Property rights for its contents, which are acquired at a negotiated price,
even up to perpetuity. Its strong content library is monetized effectively
through a strong distribution network and new business initiatives.
As Content forms core of Eros’ business model, the company kept on
improving and expanding its content library over the years. This helped it
build a wealthy content library of over 1,900 Films. With healthy movie
pipeline and planned expenditure to acquire content, Eros’ Content library
is likely to remain wealthy and keep driving its revenues, going forward.
Eros’ strong distribution network perfectly complements its rich content
library. The company’s distribution network, including India, US, and UK, is
spread across more than 50 countries. Its well established network helped it
to hold leading share in all theatrical Indian language films in the US and UK
during CY2011. Furthermore, new initiatives such as Eros Now and
penetration on internet and mobile platforms could boost its performance.
We valued Eros based on PE methodology. With a targeted PE of 14.35x on
FY2014E EPS of `22.74 we arrived at a target price of `326.00 for the stock. Our
target price represents an annualized upside of 34.8% from CMP of `224.10.
No comments:
Post a Comment