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Eros International Media
3Q11 results: On track
Revenues of Rs2.8bn were 8% above our estimates, but EBIT margin of 21.8%
was lower than our elevated estimates of 27%, given the announced successes of
releases. Nevertheless, with 87% of our PAT estimates achieved in 9MFY11, Eros
looks broadly on track to meet our FY11 forecasts.
3Q11 results: while top line was good, margins were below our expectations
! Eros reported a consolidated top line of Rs2.8bn, up 86.8% yoy (+49.9% qoq). This was 7.6%
ahead of our estimates of Rs2.6bn. The strong performance was driven by the seasonally
strongest release schedule of Hindi and regional films for the year. Catalogue sales
contributed 20% to sales during the quarter, higher than the typical 12-15% contribution.
! EBIT margin came in at 21.8%, up 747bp yoy, but down 765bp qoq. This was below our
elevated quarterly expectations of 27.0%, based on the announced successes of big-budget
Hindi films. Management said that low returns on certain movies released during the year
dragged overall profitability.
! PAT of Rs428m was up 167.4% yoy, but down 5.6% qoq, due to certain tax reversals taken in
2Q11. This was 16.7% lower than our estimates of Rs514m. Tax rate for the quarter was at
29.8% versus our estimates of 27.0%.
Eros is broadly on track to deliver on our FY11 expectations
! While 3Q11 results disappointed on margins, particularly in the context of the announced
success of major movie releases during the quarter, we believe Eros in on track to meet our
FY11 forecasts.
! On the top line, Eros has achieved 83% of our FY11F estimates of Rs7.1bn in 9mFY09. In
4Q11, the company plans to release a youth-targeted big-budget Hindi movie and a couple of
Tamil movies. Given the big release is timed in the midst of the ICC World Cup, we believe
there is uncertainty around the returns it can deliver.
! Similarly, 87% of our FY11F PAT of Rs1.2bn has been achieved in 9MFY11F. Here we do not
see any material risk to our estimates, given a good start in terms of international releases, as
well as 6-7 high-margin catalogue movies coming up for renewal in 4Q11.
Movie pipeline remains broadly stable, some slippage in FY11 regional slate
! Eros continues to have a release slate of over 50 Hindi and regional films.
! The Hindi film release slate for FY12 is broadly on track compared to timeline indicated in the
previous quarter. There are at least six big budget titles announced for FY12 (we
conservatively model only titled big-budget Hindi films for FY12), while two other big-budget
untitled films are also scheduled for FY12 release.
! The Tamil pipeline continues to be steady, although there has been slippage in timeline of
three releases from FY11 to FY12, while one has been advanced from FY12 to FY11.
! Separately, Eros announced a co-production of a live-action film starring South-Indian actor
Rajnikanth (who recently starred in the all-time highest Indian movie grosser, Robot) slated to
be released in FY12. We await more details of financial commitments for this project.
! The stock currently trades at 9.4x our FY12F EPS.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
Eros International Media
3Q11 results: On track
Revenues of Rs2.8bn were 8% above our estimates, but EBIT margin of 21.8%
was lower than our elevated estimates of 27%, given the announced successes of
releases. Nevertheless, with 87% of our PAT estimates achieved in 9MFY11, Eros
looks broadly on track to meet our FY11 forecasts.
3Q11 results: while top line was good, margins were below our expectations
! Eros reported a consolidated top line of Rs2.8bn, up 86.8% yoy (+49.9% qoq). This was 7.6%
ahead of our estimates of Rs2.6bn. The strong performance was driven by the seasonally
strongest release schedule of Hindi and regional films for the year. Catalogue sales
contributed 20% to sales during the quarter, higher than the typical 12-15% contribution.
! EBIT margin came in at 21.8%, up 747bp yoy, but down 765bp qoq. This was below our
elevated quarterly expectations of 27.0%, based on the announced successes of big-budget
Hindi films. Management said that low returns on certain movies released during the year
dragged overall profitability.
! PAT of Rs428m was up 167.4% yoy, but down 5.6% qoq, due to certain tax reversals taken in
2Q11. This was 16.7% lower than our estimates of Rs514m. Tax rate for the quarter was at
29.8% versus our estimates of 27.0%.
Eros is broadly on track to deliver on our FY11 expectations
! While 3Q11 results disappointed on margins, particularly in the context of the announced
success of major movie releases during the quarter, we believe Eros in on track to meet our
FY11 forecasts.
! On the top line, Eros has achieved 83% of our FY11F estimates of Rs7.1bn in 9mFY09. In
4Q11, the company plans to release a youth-targeted big-budget Hindi movie and a couple of
Tamil movies. Given the big release is timed in the midst of the ICC World Cup, we believe
there is uncertainty around the returns it can deliver.
! Similarly, 87% of our FY11F PAT of Rs1.2bn has been achieved in 9MFY11F. Here we do not
see any material risk to our estimates, given a good start in terms of international releases, as
well as 6-7 high-margin catalogue movies coming up for renewal in 4Q11.
Movie pipeline remains broadly stable, some slippage in FY11 regional slate
! Eros continues to have a release slate of over 50 Hindi and regional films.
! The Hindi film release slate for FY12 is broadly on track compared to timeline indicated in the
previous quarter. There are at least six big budget titles announced for FY12 (we
conservatively model only titled big-budget Hindi films for FY12), while two other big-budget
untitled films are also scheduled for FY12 release.
! The Tamil pipeline continues to be steady, although there has been slippage in timeline of
three releases from FY11 to FY12, while one has been advanced from FY12 to FY11.
! Separately, Eros announced a co-production of a live-action film starring South-Indian actor
Rajnikanth (who recently starred in the all-time highest Indian movie grosser, Robot) slated to
be released in FY12. We await more details of financial commitments for this project.
! The stock currently trades at 9.4x our FY12F EPS.
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