Mukta Arts: Other income propels profits - Views on News from Equitymaster

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Mukta Arts: Other income propels profits

Apr 18, 2001

Mukta Arts, the Subash Ghai Company, has reported a net profit of Rs 17 m in the first quarter of the current year (December ending). However, results are not comparable with last year, as the company was listed only in September 2000.

(Rs m) 1QFY02 FY01
Sales 19.5 100.8
Other Income 13.7 24.5
Expenditure 11.0 34.1
Operating Profit (EBDIT) 8.5 66.7
Operating Profit Margin (%) 43.6% 66.2%
Interest 0.1 0.4
Depreciation 5.2 13.6
Profit before Tax 16.9 77.1
Tax - 17.0
Profit after Tax/(Loss) 16.9 60.1
Net profit margin (%) 86.7% 59.6%
Diluted number of shares 23.2 23.2
Earnings per share* 2.9 10.4
*(annualised)

In the current year that is 2001, the company has planned three releases. The movie 'Rahul' has already been released, and is expected to fetch Rs 56 m for the company. While sale of music rights is expected to contribute Rs 30 m (sold to Tips Industries), sale of domestic/international theatrical rights would generate Rs 26 m. The company has completed the shooting of 'Yaadein', which is scheduled for release on 27th July 2001. Badhai Ho Badhai, the third film, is expected to be ready by the fag end of 2001.

As there were no new releases in FY01, Mukta Arts reported a sales of just Rs 100 m and a net profit of Rs 60 m. So, to widen its revenue stream and to reduce its dependence on feature film, the company has plans to tap the television software market. Given the programming capabilities of the company (the success to flop ratio is 5:2), going forward, this is expected to be one of the primary driver of revenues.

The scrip is currently trading at Rs 108, at a P/E multiple of 37.1x the annualised first quarter earnings. On the estimated sales of Rs 700 m, the market capitalisation to sales works out to 3.6x times (market capitalisation is Rs 2,500 m). The scrip is trading at a 28% discount to the offer price of Rs 150.

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