Sector financial performance:

This company, which primarily co-produces and acquires India language films, generating revenue from theatres (40%), TV (35%), and digital network (25%), has been grouped into movie& TV content sector in admission to amusement industry.

While it seems that the demand for films has been fluctuated depending on quantity and quality of release for some certain year, there is a downward global trend (except for China) in the industry of film content, which may be rooted to declining admissions of theatres in those regions. And this may be why, when the theatrical revenue (down average 3% in 2016 and 2017) of products of those companies goes down, their film content revenue from TV network (up 20% for the same period) and from physical media (up 6%) did not go down as deep as in theatres. However, the slowing down admission in theatres may, in return, affect investment for higher budget films and cause further decline in demand due to poor performance of those films. Strong increase in China’s theatrical market helps offset the decrease of admission in US market.

Growth in digital platform has been stable. Demand for TV content (series) seems to have been strong growing fast.

The general decrease in revenue has hurt profitability of those film makers in this sector. The typical company in this sector has an about 35-40% gross margin in 2017 with a SG&A as percentage of sales of about 25-32% and operating margin of 8-10%.

The typical price/cash flow is 60.

 

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Company performance:

It seems that the theatrical and TV demand for films (content) of this company has been solid but fluctuated depending on quantities and quality of content in the past several years. However, it seems that there is a downward trend in theatre exhibition of film. Demand from digital network seems to be steadily increasing.

Fiscal 2017 compared with fiscal 2016

Revenue decreased 7.8% due to decrease in India.

Theatrical revenue decreased 27% due to mix of film released.

TV revenue increased 22% due to stronger catalogue sales offset by weaker new release slate.

International (film) decreased about 3%.

Digital revenue increased 0.2%.

Fiscal 2016 compared with fiscal 2015

Revenue decreased 3.4% due to decrease in regions other than India offset by increase in India.

Theatrical revenue increased 12% due to mix of film released.

TV revenue decreased 29%.

Digital revenue increased 7%.

Its gross margin (including depreciation) has been down to about 35% in 2017.  Due to declined revenue, this company’s SG&A as percentage of sales increased to about 25% and lowered in its operating margin (about 10% in 2017).

Stock performance

This company has a stock price/cash flow ratio of 260, which, compared with its US peer, is too high due probably to higher financing costs in India and content cost of this company.