Balaji Telefilms - Q4FY12 Result update - Centrum

Disappointing standalone result

Balaji Telefilms posted disappointing Q4FY12 standalone results with revenues declining 16% YoY and operating loss increasing on the back of continuing lower programming hours both in commissioned and sponsored categories. Movies business posted strong performance on the back of success of all the movies garnering profits of Rs88mn while it generated Rs82mn from the sale of education and mobile businesses which boosted profitability. We maintain Hold rating on the stock.

- In-line with expectations: Balaji Telefilms posted 16% decline in standalone revenues on the back of lower programming hours coupled with lower realisations. Operating loss too increased to Rs16mn from Rs8mn while PAT was at Rs15mn, higher than expectations. Realizations for commissioned programming were up by 3% at Rs1.86mn/hour and for sponsored programming were down 46% to Rs0.19mn/hour. During the quarter, the company garnered Rs82.4mn in revenues on the sale of discontinued operations. On a consolidated basis the company posted revenue of Rs1877mn (down 2.3% YoY), operating profit of Rs11mn and PAT of Rs204mn.

- Lower programming hours continue to hurt: Commissioned programming hours declined from 150 hours to 120 hours during the quarter while sequentially it remained flat. In regional commissioned programming the company discontinued 3 programmes, one in Bhojpuri and two in Marathi languages. Programming hours in the Sponsored category fell from 190 hours to 126 hours during the quarter with 4 programmes on air currently.

- Movies business posts strong results: During the year the company released 'Dirty Pictures', 'Ragini MMS' and 'Shor in the City' along with a Marathi movie. It generated revenues of Rs584mn in FY12 from Rs416mn in FY11. It posted operating profit of Rs82mn (Rs25.8mn in FY11) and PAT of Rs88mn from Rs23mn a year back. The company has a strong pipeline of movies with 'Kya Super Kool Hai Hum' and 'Lootera' in the production stage and is expected to release 4 movies in FY13 and 6 in FY14.

- Maintain Hold: We believe the company needs to increase its programming hours to become operationally positive while the selling of the education and the mobile business is positive as they were burning cash. We continue to remain positive on the movies business but believe it would be difficult to scale up the business without taking risk. Cash reserve of Rs2bn is positive in the long run. We have marginally increased our earnings for FY14 and factored in higher revenues from the movies business and hence increase our target price from Rs36 to Rs38 but maintain Hold rating on the stock.

Source : Equity Bulls

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