Stock Review: Eros International

 

Cost-effective studio business model continues to secure sustained investor interest in the stock of entertainment company Eros International Media. The company's stock in the past six months has gained more than 50% against a decline of around 8% in the benchmark Sensex.

In the June 2011 quarter, the Mumbai-based company reported a net profit of . 20 crore, a growth of around 50%, against a net profit of . 13.8 crore in the corresponding quarter last year. The company's net sales also grew to . 139 crore, up around 20% year-on-year. Strong theatrical and cable & satellite revenues aided this growth in the company's revenues. At present, around 35% of the Eros's revenues come from the theatrical segment, followed by 30% from cable & satellite segment and remaining from international sales of its product offerings. A substantial portion of the theatrical revenues came from the film the company distributed: 'Zindagi Na Milegi Dubaara'. The film made revenues of . 110 crore from the Indian market. It earned a total of . 145 crore which included sales in the overseas markets.

The company has lined-up five big releases in the coming quarters --Mausam, RA.One, Rockstar, Desi-Boyz and Agent Vinod. These films cater to a wide range of audiences and belong to all the three categories of films -- big, medium and small-budget. Directors associated with these films have a bright and convincing track record. Further, a few of these films such as RA.One, Rockstar and Mausam have already created tremendous viewer interest, considering the star cast and directors associated with it and also because they fall under the big-budget category. Eros derives 50-60% of its overall revenues from such bigbudget films. Hence, the second half of this fiscal will be lucrative for the company in the theatrical segment. Recently, the company entered into pre-licensing deals with prominent broadcasters such as Star Network, Zee TV and Sony as part of its de-risking business model. Various satellite deals with these broadcasters help the company recover over 40% of its cost of production. In the coming quarters, this will strengthen its overall de-risking business model and help in a swift breakeven on its projects.