Balaji Telefilms has ended FY02 with a spectacular 567% rise in net income. Topline of the company crossed the crucial Rs 1 bn revenues mark, representing a rise of 126%. Operating margins leapfrogged to 42% from 16% last year. This is inspite of a change in accounting policy of the company for full write off of its cost of production. Now, this is what you call the business of entertainment! Both the topline and bottomline are above our and market expectations.
Operating Profit (EBDIT)
Operating Profit Margin (%)
Profit before Tax
Profit after Tax/(Loss)
Net profit margin (%)
No. of Shares (eoy) (m)
Diluted Earnings per share*
P/E (at current price)
The rise in operating margins is due to two prominent reasons. One, there is marked shift in the revenue mix of the company towards commissioned programs. In the commissioned programs, the company doesn't bear any risk and assumes responsibility to deliver content to the broadcaster. Here the company enjoys assured operating margins from the broadcaster. However, the IPR of the content gets transferred to the broadcaster.
Revenue Mix- A marked shift
Secondly, there is a sharp spurt in margins for both the commissioned as well as sponspored programs as shown in the table below. This very well explains a tremendous bargaining power, which the company's programs enjoy with broadcasting companies. There has been a upward revision after the company re-negotiated rates for all its major programs.
OPM- Displaying strong bargaining power
At the current market price of Rs 544, the stock is trading at 19x FY02 earnings. The company is expected to continue its growth momentum as programming hours are set to increase. The company believes that there is vaccum of good programmes on the weekends currently and plans to create programs to fill up these slots. The next thing on the block is small/medium budget telefilms production. However, markets seem to have been already build in a lot of expectations from the company. Going forward, the company needs to maintain its leadership position in creating cutting edge content. Forward numbers for the next two years look attractive. The company has an unparrelled track record. However, success cannot be assured going forward. After all, it is the world of entertainment.
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