Buy UTV Software Communications - Fairwealth Securities

UTV Software Communications Ltd is India's first integrated global media and entertainment company. The company has five business verticals, which includes TV content production & services, motion pictures, broadcast, interactive and new media. It has diversified across all major media platforms and has created highly scalable business models for each of the existing business verticals. This makes it the most respected integrated media companies in India.

Key Highlights

- UTV Software is looking to scale up its broadcasting and gaming business. In console gaming business, the company has invested around $70 million so far. It would induct a strategic partner in the subsidiary, for divesting as much as 50% stake to ensure good synergy for distribution and marketing of its games. Cash generated through divestment would be used to retire some of its debt to raise its flexibility in the future.

- Company has plans to launch 12 movies this year, of which two movies - 'I hate luv stories' and 'Rajneeti', have already hit the cineplexes. They are expecting projected revenue of Rs.450 crore for the financial year 2010-11, which will be 95 percent up from Rs.230 crore revenue in financial year 2009-10.

Future Outlook

At Current market price of Rs486, the stock is available at a P/E of 18.35x of its FY11E earnings, and 15.2x of its FY12E earnings. We recommend a BUY with target price of Rs597, given that company's future shows potential.

Source : Equity Bulls

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