Recommendation: Buy
CMP = Rs 181 (at the time of recommendation)
Price target: Rs 299
Key points:
- Balaji Telefilms Ltd (BTL) operating performance for Q4FY2008 was above our expectation. Programming hours in the commissioned category increased to 289.5 hours from 201 hours in Q4FY2007 with the launch of four new shows in the last two quarters. Much lower realisation on these shows combined with discontinuance of one of the more popular and high-revenue yielding shows Kasauti Zindagi Kay led to an anticipated drop in the blended realisation in the commissioned category to Rs 29.7 lakh per hour.
- Overall revenues for the quarter increased by 24.7% yoy to Rs 96.5 crore. The operating profit margin (OPM) for the quarter stood at 36% against 39.3% in Q4FY2007. Thus the adjusted net profit for the quarter increased by 14.7% yoy to Rs 24.4 crore.
- BTL has pounced on the opportunity provided by the increasing demand for content in Hindi general entertainment channel (GEC) space with the launch of new channels and shows. It has launched four new shows during the last two quarters — Kahe Naa Kahe and Kya Dil Main Hai on 9x and Kuchh Is Tara on Sony and Kis Des Mein Hain Mera Dil on Star Plus. In the coming quarters, the company is looking to diversify its business by launching reality shows such as Kaun Jeetega Bollywood Ka Ticket on 9x, Gharwali Baharwali on Sony and a mythological show of Mahabharat. These new launches will ensure growth in the television content business going forward.
- In the film segment, Balaji Motion Pictures is distributing Ram Gopal Verma's Sarkar Raj and will also release its co-production Woodstock Villa. Thus BTL has ventured film production and distribution in a big way and targets releasing seven to eight movies a year.
- I am quite positive on the television content and film businesses of BTL. At the current market price of Rs 181.3, the stock trades at 9x its FY10E earnings per share (EPS) of Rs 20.2.
- I maintain a strong Buy recommendation on BTL with a price target of Rs 299 over next 6 months.
