KR Choksey Institutional Research has recommended 'Buy' on Eros International Media with target price of Rs 213 as against current market price (CMP) of Rs 154 with potential upside of 38% in its report.
Commenting on the investment rationale, the stock broker said, ''Revenue grew by 17% YoY to Rs 4.33 billion in Q3 FY14 against our expectation of Rs 4.04 billion. Positive surprise at revenue front was led by huge spurt in catalogue monetization which increased by around 75% YoY to Rs.60 crore in Q3 FY14. Revenue from other main streams such as theatrical and satellite rights were more or less in with expectation i.e. Rs 1.7 billion (39% of revenue) and Rs 1.1 billion (25% of revenue), respectively, in Q3 FY14.
EBITDA margin improved by 679 bps QoQ to 31.3% in Q3 FY14 significantly better than our estimates of 25% margin level. Higher than expected EBITDA margin was primarily led by catalogue monetization as minimum expenditure is incurred for earning the same and hence top-line directly flows to bottom-line.
We believe strong movie slate lined-up for release in FY15E will support mid-teen growth rate in the coming year. Moreover, we expect EBITDA margin will continue to be in the range of 25% supported by catalogue monetization. Further, clarity from Parent Company in respect of terms for sharing overseas films rights on agreement renewal will remove major overhang on the stock. We recommend 'BUY' on the stock with a price target of Rs.213 by assigning P/E multiple of 13 times to FY15E adjusted EPS of Rs 16.4.''
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