Revenues came in at | 408.2 crore higher than expectations of | 363.8 crore aided by the successful box-office run of some of the Eros banner films such as Housefull 3’, Ki and Ka, Sardaar Gabbar Singh’ (Telugu), 24’ (Tamil), and Nil Battey Sannata’ among a host of other films. The revenues were also aided by satellites sales of some of the movies released in the quarter. EBITDA came in at | 81.0 crore vs. our expectation of | 71.8 crore while margins came in at 19.8%. Though the costs were higher than expectations, increased contribution from the higher margin earning satellite revenues helped Eros in clocking in-line margins. PAT came in at | 58.9 crore, higher than our estimate of | 39.7 crore owing to the beat at the operating performance level and lower than expected tax expenses.
The company has done its best to come clear of the recent allegations. The new transfer pricing mechanism is an added positive. However, clarity on the Eros Now potential and rationale for 10-15% stake would have been better. We value Eros at 8x FY18E EPS arriving at a target price of | 225. We maintain HOLD.