Eros International - High growth potential; de-risked model!!! - ICICIdirect

Eros International, a leading producer/distributor with the largest film library is best positioned to capitalise on changing dynamics of the film entertainment industry. While increasing penetration of multiplex screens & higher average ticket prices will lead to robust growth in theatrical revenue, advent of premium TV, pay per view, online media & rise in cost of satellite rights on the back of imminent digitisation will help monetise the long tail more effectively.

Bundled deals with satellite channels and guaranteed 39% cost recovery from its parent make the company's business model relatively de-risked. A consistent track record in delivering three to four movies in the top 10 grosser at box office each year & strong movie slate lends stability & visibility to future earnings.

Eros is expected to post revenue & PAT CAGR of 19.4% and 19.1%, respectively, over FY12-15E. Eros is cheaply valued compared to other media businesses. Given the structural shift in film entertainment space, a re-rating is on the cards. We initiate coverage with BUY and TP of Rs.267.

Source : Equity Bulls

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