Balaji Telefilms - Movies to drive in FY14 growth - Centrum

Balaji Telefilms posted better than expected Q3FY13 results with a turnaround in core TV production business. Steady commissioned programming hours along with healthy realisations gave a fillip to revenues. Closure of sponsored programming and cost rationalisation helped the turnaround of the company. Going forward we expect the movie business to drive growth in FY14 which will help increase profitability. We maintain our BUY on the stock.

Q3FY13 results better than expectated: Sales of the company was at Rs333mn down 3.6% YoY on the back of closure of sponsored programming for Sun group during the quarter. Operating profit was Rs18mn on the back of significant reduction in cost and closure of loss making sponsored programming. PAT was at Rs49mn, up 340%YoY as the company availed of a tax writeback. On a consolidated basis the company posted revenues of Rs465mn and PAT of Rs102.3mn.

Realisations and programming hours to improve: During the quarter the company had 146 hours of commissioned programming which was up from 120hours YoY and 145 hours QoQ. The company currently has 6 programmes on air and is expected to add one more from Q4. Realisations for commissioned programming increased to 2.18mn/hour from Rs2mn/hour in Q3FY12. We expect these levels to sustain as the company is focussing on profitability. Sponsored programming business during the quarter was closed and clocked zero programming hours as it was loss making.

Movies business to become future growth driver: In Q3FY13, BMPL received monies for the satellite rights of Kyaa Super Kool Hain Hum after receiving clearances from the CBFC and FCAT. Further it has already committed a sale of rights for music, overseas and home video for 5 of its movies to be released in CY2013. The company has also firmed up plans to distribute all its films to be released in 2013 across the Mumbai and Delhi territories. In FY14 the company is expected to release 6 Hindi movies at a total cost of ~Rs2bn while expecting minimum 15-20% returns on this portfolio. We have modeled revenues of Rs2.5bn with PAT at Rs332mn.

Margins to expand going forward: The company posted operating margins of 5.5% as it cut its expenditure on the back of closing loss making sponsored programming business. We believe with this revenue the company will have 7-9% operating margins in the standalone business while the movies business will have operating margins of 15-17%.

Maintain BUY: The stock is currently trading at 20.9x and 6.6x FY13E and FY14E respectively. We believe the turnaround in the television production business and strong traction in the movie business will give fillip to the stock. We maintain our BUY rating with a target price of Rs60.

Source : Equity Bulls

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