Result Update

February 15, 2013

Rating matrix
Rating Target Target Period Potential Upside : : : : Buy | 267 12 months 39%

Eros International (EROINT)

| 192
WHATS CHANGED
PRICE TARGET ....................................................................................................Unchanged
FY14E 1,335.6 309.8 204.1 22.2 FY15E 1,614.6 378.3 249.2 27.2

Key Financials
| Crore Net Sales EBITDA Net Profit EPS (|) FY12 944 212.4 147.8 16.1 FY13E 1,050.7 224.3 152.0 16.6

EPS (FY13E) ......................................................................... Changed from | 19.8 to | 16.6 EPS (FY14E) ........................................................................................................ Unchanged EPS (FY15E) ........................................................................................................ Unchanged RATING ...............................................................................................................Unchanged

Valuation summary
P/E Target P/E EV / EBITDA P/BV RoNW RoCE FY12 11.9 16.6 8.9 2.1 17.7 16.2 FY13E 11.6 16.1 8.8 1.8 15.7 15.4 FY14E 8.6 12.0 6.3 1.5 17.6 18.7 FY15E 7.1 9.8 4.9 1.3 17.9 19.9

Tamil movies shine

Eros International reported its numbers, which were better than our expectations. The topline came in at | 369.3 crore against our estimate of | 338.7 crore, driven by theatrical revenues from movies like Thuppakki (Tamil), Maataran (Tamil), Son of Sardaar and Khiladi 786. With this quarter, the company has reported 16.1% topline growth for 9MFY13, though in Q3FY13 the company reported a 9.6% decline. EBITDA margins also came in well above our estimates of 19.6% to 24.5% due to better than expected topline. EBITDA for the quarter stood at | 90.6 crore. PAT for the quarter declined 5.6% YoY to | 65.2 crore. On a 9M basis, PAT registered growth of 3.9%. With a better than expected quarter, we continue to remain bullish on the relatively de risked business model of Eros supported by growing theatrical and TV syndication revenues. The company has another big starrer movie (Go Goa Gone) set to release in Q4FY13 while Kochadaiyaan the Rajinikanth starrer movie has been postponed to Q1FY14. We have, thus, revised our FY13 estimates downwards while maintaining our FY14 estimates. We have valued the stock at 12x FY14E EPS to arrive at a target price of | 267. Maintain BUY. Tamil Movies steal the show Among Hindi movies, while Son of Sardaar performed well with a net worldwide collection of | 108.5 crore, Khiladi 786 was average with net worldwide collection of | 77 crore. English Vinglish, made on a small budget, collected | 67.5 crore worldwide, which was praiseworthy. However, Tamil movies stole the show in this quarter, with Thuppakki and Maataran reporting domestic net box office collection of | 180 crore and | 90 crore, respectively. Maintain BUY For the first time since listing, the company has declared a dividend of | 1.5/share. We believe the dynamics of the film industry are changing positively and a re-rating of the stock is on the cards. We continue to value the stock at 12x FY14E EPS to arrive at a target price of | 267. We maintain BUY.
Exhibit 1: Valuation Metrics
(| Crore) Total Operating Income EBITDA EBITDA Margin (%) Depreciation Interest Other Income Reported PAT EPS (|) Q3FY13 369.3 90.6 24.5 1.6 2.6 0.8 65.2 7.1 Q3FY13E 338.7 66.5 19.6 1.7 4.4 8.0 50.3 5.5 Q3FY12 408.4 101.0 24.7 1.5 4.5 3.2 69.1 7.5 Q2FY13 229.3 42.3 18.4 1.7 2.7 1.8 26.1 2.8 QoQ (Chg %) 61.1 114.5 611 bps -7.1 -5.1 -55.1 150.0 149.8 YoY (Chg %) -9.6 -10.3 -19 bps 4.7 -42.1 -74.8 -5.6 -5.9

Stock data
Stock Data Market Capitalization Total Debt (FY12) Cash and Investments (FY12) EV 52 week H/L Equity capital Face value MF Holding (%) FII Holding (%) | 1762 Crore | 436.2 Crore | 300.4 Crore | 1897.9 Crore 224 / 156 | 91.8 Crore | 10 2.7 7.3

Price movement
7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 Feb-12 May-12 Aug-12 Nov-12 Nifty (L.H.S) Price (R.H.S) 250 200 150 100 50 0 Feb-13

Analysts name
Karan Mittal karan.mittal@icicisecurities.com Anil Shenoy anil.shenoy@icicisecurities.com

Source: Company, ICICIdirect.com Research

\

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Exhibit 2: Assumption Table

FY13E Movies Released A B C D Regional languages 5 6 7 12 50 FY14E 7 6 7 12 52 FY15E 8 7 8 14 54

Source: Company, ICICIdirect.com Research

Result analysis

Good movies in Q3FY13; solid pipeline ahead Eros released a couple of big starrer movies viz. Son of Sardaar and Khiladi 786. While Son of Sardaar did a good job with a net box office collection of | 108.5 crore worldwide, Khiladi 786 did average business with a worldwide net collection of | 77 crore. However, Tamil movies stole the show in Q3FY13 with Vijay starrer Thuppakki posting a domestic net box office collection of | 180 crore. Maataran also performed well with a domestic net box office collection of | 90 crore.
Exhibit 3: Movies in Q3FY13
Movies released English Vinglish Son of Sardaar Maataran Thuppaki Khiladi 786 Comment Made on a small budget; net box office collection of | 67.5 crore worldwide net box offcie collection of | 108.5 crore worldwide domestic net box office collection of | 90 crore domestic net box office collection of a whooping | 180 crore Net box office collection of | 77 crore worldwide

Source: Company, ICICIdirect.com Research

Going forward, Eros has a strong movie pipeline with Go Goa Gone starring Saif Ali Khan set to release in Q4FY13. Kochadaiyaan starring Rajinikanth, which was slated for a Q4FY13 release, has been postponed to Q1FY14. Along with Kochadaiyaan, another Rajinikanth starrer Rana, along with movies like Sarkar 3, Krrish 3 and an untitled movie with Saif Ali Khan would be releasing in FY14.
Exhibit 4: Movie Pipeline
Movie name Attacks of 26/11 3G Warning (3D) Go Goa Gone Kochadaiyaan (Tamil, Hindi, Telugu) Ye Jawani Hai Deewani Dishkiyaaoon Ram Leela Tanu Weds Manu Season 2 Rambo Rajkumar Singh Saab the Great Krrish 3 Untitled Sarkar 3 Rana (Tamil, Hindi Telugu) Bajirao Mastani Tamil Untitled Aankhen 2 Starcast / (Director) (Ram Gopal Verma) Neil Nitin Mukesh, Sonal Chauhan (Shantanu Ray, S Anand) Santosh Barmola, Madhurima Tuli ( Anubhav Sinha) Saif Ali Khan, Kunal Khemu (Krishna DK, Raj Nidimoru) Rajnikanth, Deepika Padukone (Soundarya Rajnikanth) Ranbir Kapoor, Deepika Padukone (Ayan Mukerji) Sanjay Dutt, Haman Baweja (Sanamjit Singh Talwar) Ranvir Singh, Deepika Padukone ( Sanjay Leela Bansali) R Madhavan, Kangana Ranaut ( Anand Raj) Shahid Kapoor, Sonakshi Sinha (Prabhu Deva) Sunny Deol (Anil Sharma) Hrithik Roshan, Priyanka Chopra (Rakesh Roshan) Saif Ali Khan Amitabh Bachchan, Abhishek Bachchan (Ram Gopal Verma) Rajnikanth (KS Ravikumar) (Sanjay Leela Bansali) Rajnikanth (KV Anand) Abhishek Bachchan (Apporva Lakhia)

Source: Company, ICICIdirect.com Research

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Outlook & valuation

The numbers for the quarter were better than our expectations due to the exceptional performance of Tamil movies. However, Kochadaiyaan a Rajinikanth starrer Tamil movie, which was previously slated for release in Q4FY13, has been postponed to Q1FY14. Thus, we have revised our EPS estimate for FY13 from | 19.8 to | 16.6. We have not revised our FY14 estimates though. The management indicated that the subscription channels HBO Hits and HBO Defined as per the deal with HBO would be launched by FY13 through a couple of DTH players. By FY14, the channels are expected to be launched across all he DTH players with a few players from digital cable as well. Eros has signed a deal with Endemol wherein the company would co produce three movies with Endemol India, which are expected to release in FY15. Also, Endemol owns IP to popular content on television like Big Boss, Fear Factor, etc. With Eros IP ownership of ~ 1000 movies, the deal would provide an opportunity to monetise TV content on the big screen and vice versa a model seen in Hollywood with movies like Transporter and Star Trek being shown as a television series while TV shows like 24 and Sex and the City were made into a movie. During the quarter, the promoters of the company had come out with an open offer to offload 2.8% of their stake to adhere to Sebi guidelines of minimum 25% public shareholding. At a floor price of | 200, the issue was subscribed 4.4x. The company declared a dividend in this quarter for the first time since its listing in 2010. The dividend was of | 1.5/share. We believe the dynamics of the film industry are changing positively and a re-rating of the stock is on the cards, especially considering that it is trading at a significant discount to other media businesses. We continue to value the stock at 12x FY14E EPS to arrive at a target price of | 267. We maintain BUY.
Exhibit 5: Valuation
Sales (| cr) 943.9 1050.7 1335.6 1614.6 Growth (%) 33.5 11.3 27.1 20.9 EPS (|) 16.1 16.6 22.2 27.2 Growth (%) 26.1 2.8 34.3 22.1 PE (x) 11.9 11.6 8.6 7.1 EV/EBITDA (x) 8.9 8.8 6.3 4.9 RoNW (%) 17.7 15.7 17.6 17.9 RoCE (%) 16.2 15.4 18.7 19.9

FY12 FY13E FY14E FY15E

Source: Company, ICICIdirect.com Research

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Financial summary
Profit and loss statement
(Year-end March) Total operating Income Growth (%) Operating Expenses Employee Expenses Administrative Expenses Total Operating Expenditure EBITDA Growth (%) Depreciation Interest Other Income PBT Total Tax Minority Interest PAT Growth (%) EPS (|) FY12 943.9 33.5 662.5 22.6 46.4 731.5 212.4 36.0 6.0 13.4 19.3 212.3 63.1 1.3 147.8 26.1 16.1 FY13E 1,050.7 11.3 749.6 24.2 52.5 826.3 224.3 5.6 6.8 10.7 10.0 216.9 64.2 0.7 152.0 2.8 16.6 FY14E 1,335.6 27.1 921.6 30.7 73.5 1,025.8 309.8 38.1 9.7 13.5 10.0 296.6 92.5 204.1 34.3 22.2 (| Crore) FY15E 1,614.6 20.9 1,120.0 35.5 80.7 1,236.2 378.3 22.1 12.6 13.5 10.0 362.2 113.0 249.2 22.1 27.2

Cash flow statement

(Year-end March) Profit after Tax Add: Depreciation (Inc)/dec in Current Assets Inc/(dec) in CL and Provisions Others CF from operating activities (Inc)/dec in Fixed Asset Others CF from investing activities Issue/(Buy back) of Equity Inc/(dec) in loan funds Dividend & dividend tax Others CF from financing activities Net Cash flow Opening Cash Closing Cash FY12 147.8 249.5 321.5 -137.5 13.4 594.7 -583.1 -102.4 -685.6 0.3 237.6 2.5 240.5 149.6 150.8 300.4 FY13E 152.0 354.4 -40.4 32.2 10.7 509.0 -216.1 -347.7 -563.8 0.0 0.0 (16.1) -10.7 -26.8 -81.6 300.4 218.7 FY14E 204.1 398.7 -107.8 86.0 13.5 594.6 -136.5 -389.7 -526.2 0.0 0.0 (16.1) -13.5 -29.6 38.7 218.7 257.4 (| Crore) FY15E 249.2 490.5 -105.5 84.2 13.5 731.9 -135.6 -478.6 -614.2 0.0 0.0 (16.1) -13.5 -29.6 88.1 257.4 345.5

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

Balance sheet
(Year-end March) Liabilities Equity Capital ESOP's Reserve and Surplus Total Shareholders funds Total Debt Other Non Current Liabilities Total Liabilities Assets Gross Block Less: Acc Depreciation Net Block Capital WIP Total Fixed Assets Investments Inventory Debtors Loans and Advances Other Current Assets Cash Total Current Assets Creditors Provisions Total Current Liabilities Net Current Assets Other Non Current Assets Deffered tax assets Application of Funds FY12 91.7 1.9 741.0 834.6 436.2 118.4 1,389.2 FY13E 91.7 1.9 876.9 970.5 436.2 119.1 1,525.8 FY14E 91.7 1.9 1,064.9 1,158.5 436.2 119.1 1,713.8 (| Crore) FY15E 91.7 1.9 1,297.9 1,391.6 436.2 119.1 1,946.9

Key ratios
(Year-end March) Per share data (|) EPS Cash EPS BV DPS Cash Per Share Operating Ratios (%) EBITDA Margin PBT / Total Operating income PAT Margin Inventory days Debtor days Creditor days Return Ratios (%) RoE RoCE RoIC Valuation Ratios (x) P/E EV / EBITDA EV / Net Sales Market Cap / Sales Price to Book Value Solvency Ratios Debt/EBITDA Debt / Equity Current Ratio Quick Ratio FY12 16.1 16.8 90.9 0.0 32.7 22.5 22.5 15.7 2.7 94.7 108.5 17.7 16.2 19.1 11.9 8.9 2.0 1.9 2.1 2.1 0.5 2.3 2.3 FY13E 16.6 17.3 105.8 1.5 23.8 21.4 20.6 14.5 2.7 94.7 108.5 15.7 15.4 16.8 11.6 8.8 1.9 1.7 1.8 1.9 0.4 1.9 1.9 FY14E 22.2 23.3 126.2 1.5 28.1 23.2 22.2 15.3 2.7 94.7 108.5 17.6 18.7 20.7 8.6 6.3 1.5 1.3 1.5 1.4 0.4 1.9 1.9 FY15E 27.2 28.5 151.6 1.5 37.6 23.4 22.4 15.4 2.7 94.7 108.5 17.9 19.9 23.0 7.1 4.9 1.1 1.1 1.3 1.2 0.3 2.0 1.9

1,903.9 1,375.1 528.8 428.0 956.8 51.5 7.0 245.0 40.0 65.1 300.4 657.5 280.7 4.3 285.0 372.5 6.9 1.5 1,389.2

2,509.1 1,770.9 738.2 428.0 1,166.2 51.5 7.8 272.7 44.6 72.5 218.7 616.3 312.4 4.8 317.2 299.1 6.9 2.2 1,525.8

3,257.7 2,392.7 865.0 428.0 1,293.0 51.5 9.9 346.6 56.7 92.1 257.4 762.8 397.2 6.0 403.2 359.6 6.9 2.9 1,713.8

4,182.3 3,194.3 987.9 428.0 1,415.9 51.5 12.0 419.0 68.5 111.3 345.5 956.4 480.1 7.3 487.4 469.0 6.9 3.6 1,946.9

Source: Company, ICICIdirect.com Research

Source: Company, ICICIdirect.com Research

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Company Description
Eros International Media Ltd is a leading company in the Indian film entertainment industry that acquires, co-produces and distributes Indian language films in multiple formats. The company was incorporated in 1994 and listed in 2010. Eros co-produces 60% of the movies while the rest are either acquired or produced. The company has had long industry associations, a consistent track record of releasing three to four movies of the top 10 movies in the box office and a wide distribution network. Eros has been able to develop strong relationships with key figures in the Indian film industry, which help it secure key films and build a strong portfolio of movies. Some of the big starrer movies to which Eros has the rights include Ra.One, Housefull, Housefull 2, Ready, Rockstar, Golmaal 3, Om Shanti Om, Hey Babyy, Love Aaj Kal, De Dana Dan etc.
Exhibit 6: Recommendation History
300 250 200 150 100 50 0 Feb-12 Apr-12 May-12 Jul-12 Price Aug-12 Oct-12 Nov-12 Jan-13 Feb-13

Target Price

Source: Reuters, ICICIdirect.com Research

Exhibit 7: Recent Releases

Date 4-Jan-13 8-Jan-13 Event Initiating Coverage Q3FY13 Result Preview CMP 207 209 Target Price 267 267 Rating BUY BUY

Source: Company, ICICIdirect.com Research

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ICICIdirect.com coverage universe (Media companies)

CMP M Cap Sector / Company (|) TP(|) Rating (| Cr) 239 274 Buy 4,339 DB Corp (DBCORP) 68 80 Buy 7,196 DISH TV (DISHTV) 235 266 Buy 1,118 ENIL (ENTNET) 192 267 Buy 1,762 Eros (EROINT) 237 295 Buy 4,211 Hathway Cables (HATCAB) 102 128 Buy 2,398 HT Media (HTMED) 103 131 Buy 4,147 Jagran Prakashan (JAGPRA) 260 261 Hold 673 PVR (PVRLIM) 443 498 Buy 19,617 Sun TV (SUNTV) 227 268 Buy 21,721 ZEE Ent. (ZEETEL) Source: Company, ICICIdirect.com Research EPS (|) P/E (x) EV/EBITDA (x) FY12 FY13E FY14E FY12 FY13E FY14E FY12 FY13E FY14E 11.0 11.5 14.1 24.9 23.9 19.5 14.2 13.3 10.6 -1.3 -0.8 -0.5 NM NM NM 16.2 13.7 10.1 11.8 12.7 14.3 19.9 18.4 16.4 8.9 7.9 6.1 16.1 16.6 22.2 11.9 11.6 8.6 8.9 8.8 6.3 -3.4 -1.9 0.7 NM NM NM 21.4 15.3 11.4 7.0 7.4 9.4 14.5 13.7 10.9 9.0 8.4 6.4 5.6 7.9 7.3 18.2 12.9 14.0 11.0 10.0 7.8 9.8 7.5 14.5 26.5 34.6 17.9 15.0 8.7 5.0 17.6 17.3 21.7 25.2 25.6 20.5 12.1 11.7 9.6 6.1 7.4 8.7 36.9 30.5 26.0 29.0 22.8 18.3 RoCE (%) FY12 FY13E FY14E 26.6 26.0 29.3 NM NM NM 15.3 13.8 14.9 16.2 15.4 18.7 1.8 3.5 6.7 10.1 9.4 10.9 23.1 22.2 27.3 9.0 4.8 8.9 35.7 34.0 37.0 20.5 22.4 23.7 RoE (%) FY12 FY13E FY14E 21.7 20.0 20.9 NM NM NM 12.8 12.2 12.0 17.7 15.7 17.6 NM NM 1.3 11.4 10.9 12.1 23.7 29.4 24.7 9.1 4.7 8.4 26.6 24.2 26.6 17.1 17.9 18.0

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RATING RATIONALE

ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns ratings to its stocks according to their notional target price vs. current market price and then categorises them as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional target price is defined as the analysts' valuation for a stock. Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction; Buy: >10%/15% for large caps/midcaps, respectively; Hold: Up to +/-10%; Sell: -10% or more;

Pankaj Pandey

Head Research ICICIdirect.com Research Desk, ICICI Securities Limited, 1st Floor, Akruti Trade Centre, Road No 7, MIDC, Andheri (East) Mumbai 400 093 research@icicidirect.com

pankaj.pandey@icicisecurities.com

ANALYST CERTIFICATION
We /I, Karan Mittal MBA, Anil Shenoy MBA research analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our personal views about any and all of the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Analysts aren't registered as research analysts by FINRA and might not be an associated person of the ICICI Securities Inc.

Disclosures:
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