SAI PARSADAM
BIG BOSS
VIKAS PARSHURAM SAMWATSARE
DATED:- 12/12/12
Buy Eros International Media Limited For Target Rs. 326.00
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. Eros – Consolidated Financials at a glance (all data in ` Crores unless specified)
Buy MRF Ltd For Target Rs..12129.00
* MRF Ltd is India’s largest tyre manufacturer & it is the first tyre company in India to reach a turnover of 5000 Crores.
* The Company engaged in the manufacture, distribution, and sale of tyres for various kinds of vehicles in India & internationally.
* MRF exports its products to over 65 countries.
The company is provides tubes, flaps, tread rubber, conveyor belts, specialty coatings, & sports goods.
* MRF Ltd has demonstrated the results during the quarter; its boisterous growth of Net Sales is steers by 14.27% to Rs. 29936.20 million.
* The company has recommended a Final Dividend of Rs.19/- per share on the paid-up capital as at September 30, 2012.
* MRF Ltd has recommended a Final Dividend of Rs.10/- per share along with the 2 Interim Dividends of Rs.3/- each i.e. 250% for the year
ended September 30, 2012.
* Profit before interest, depreciation and tax is Rs.3696.90 millions as against Rs.1832.50 millions in the corresponding period of the previous year.
* Net Sales and Operating Profit of the company are expected to grow at a CAGR of 16% and 8% over 2011 to 2014E respectively.
Outlook and Conclusion
* At the current market price of Rs.10733.95, the stock P/E ratio is at 7.38 x FY13E and 6.84 x FY14E respectively.
* Earning per share (EPS) of the company for the earnings for FY13E and FY14E is seen at Rs.1454.69 and Rs.1569.04 respectively.
* Net Sales and Operating Profit of the company are expected to grow at a CAGR of 16% and 8% over 2011 to 2014E respectively.
* Price to Book Value of the stock is expected to be at 1.31 x and 1.10 x respectively for FY13E and FY14E.
The fourth quarter witnesses a healthy increase in overall sales and profit slumped down on account of powerful combination of exciting products, an enhanced store network and robust infrastructural Support system. We expect that the company surplus scenario is likely to continue for the next three years, will keep its growth story in the coming quarters also. We recommend ‘BUY’ in this particular scrip with a target price of Rs.12129.00 for Medium to Long term investment.
Buy Jubilant Life Sciences Ltd For Target Rs. 278/286/295
LONG TERM TECHNICAL BUY CALL ON JUBILANT LIFE SCIENCES LIMITED CMP: RS. 239 AND DIPS TO 227 WITH THE STOPLOSS OF RS. 220 ON CLOSING BASIS FOR THE TARGET OF RS. 278/286/295.
HOLDING PERIOD:3-4MONTHS
* After the fall from Rs. 390 to 147, the stock made “Harami Pattern” at the bottom in Daily chart andmoved up. The share price went into a consolidation mode after moving up. The stock spent the last eighteen months consolidating between the broad range of Rs 150 to Rs 228 levels. Lastweek, it broke the falling trendline resistance in daily chart and moved up.
* We saw “Rectangle Pattern” breakout in the stock in weekly chart with healthy volumes, which is bullish chart pattern.
* On the oscillator front, RSI is movingwell above its average in weekly chart and it also broke the rectangle pattern, which indicates price tomove towards north.
* MACD is alsomoving in upward direction in positive zone, which supports the buy call on the stock
Buy Muthoot Capital Services Ltd For Target Rs.110
Snapshot
A small player in the NBFC segment, Muthoot Capital is a part of the Pappachan Muthoot Group. The company is growing at a scorching pace in mumuthe financing of the two-wheelers and three-wheeler segment.
Investment Rationale
* Changing the business model at the right time: The company has changed the business model at the right time and shifted from the regulatory-impacted gold loan business to relatively stable and safer automobile finance business.
* Strong growth expected going forward: The AUM of the company stood at approximately Rs.300 crore. We expect the company to reach
a target of Rs.450-500 crore by the end of FY’13E.
* Strong promoter holding: The promoter holding in the company stood at 77 per cent. In order to comply with the regulatory requirements,
the holding has been reduced to marginally below 75 per cent.
* Consistent dividend pay-out ratio: The company has got a consistent dividend pay-out ratio of around 25 per cent. We expect this trend to
continue further and going by the earnings for H1FY’13, the company should pay a dividend of Rs.4 for FY’13E translating into a dividendyield
of ~4.5 per cent.
Valuation & Recommendation
Muthoot Capital Services logged interest income of Rs.67.3 crore compared to Rs.37.1 crore, an increase of 80.9 per cent y-o-y for FY’12. Profit after tax for the year stood at Rs.15.5 crore compared to Rs.9.7 crore for FY’11. EPS for the year stood at Rs.13.12 and adj. book value stood at Rs.68.7.
During H1FY’13, the company registered interest income of Rs.46.2 crore, an increase of 72.2 per cent y-o-y. Net Interest Income for half-year stood at Rs.30.5 crore compared to Rs.17.8 crore last year, an increase of 71.3 per cent y-o-y. PAT for the H1FY’13 stood at Rs.10 crore compared to Rs.5.7 crore last year, translating into an EPS of Rs.8.02. The book value as on date stands at Rs.77.7.
We value the company at 1.25x FY’13E adj. book value to arrive at a target price of Rs.110 over the next 6 to 9 months providing an upside potential of 24 per cent.
contt us
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