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Balaji: Soaps turning slippery?
Jul 30, 2008

Performance summary
  • Topline grows by 23% YoY during 1QFY09 due to higher commissioned programming hours.

  • EBITDA margins decline by 4.9% to 34.7% during the quarter.

  • Other income zooms 76% YoY in 1QFY09.

  • Bottomline registers a growth of 21% YoY during 1QFY09 due to topline growth and higher other income in spite of lower operating margins.



Standalone financial snapshot
(Rs m) 1QFY08 1QFY09 Change
Net sales 745 916 22.9%
Expenditure 450 598 32.9%
Operating profit (EBDITA) 295 318 7.6%
EBDITA margin (%) 39.6% 34.7%  
Other income 24 43 75.7%
Interest - -  
Depreciation 33 34 4.8%
Profit before tax 287 326 13.8%
Tax 102 104 1.3%
Profit after tax/(loss) 184 223 20.7%
Net profit margin (%) 24.7% 24.3%  
No. of shares (m)   65.2  
Diluted earnings per share (Rs)*   14.0  
Price to earnings ratio (x)*   12.7  
*On trailing twelve months basis

What has driven performance in 1QFY09?
  • Balaji’s average realisation per hour increased from Rs 2.15 m in 1QFY08 to Rs 2.24 m in 1QFY09. Realisations per hour in sponsored programming increased from Rs 0.42 m in 1QFY08 to Rs.0.50 m in 1QFY09. On the other hand, realization per hour from commissioned programming decreased from Rs. 3.35 m in 1QFY08 to Rs.3.07 m in 1QFY09.

  • The share of commissioned programming in the revenue during 1QFY09 was 93%, while that of sponsored programming was 7%.

  • For the week ended June 28, 2008, 11 out of the top 25 shows were from Balaji.

    Over the quarters
    Realisation rates
    Rs m/ per hour 1QFY07 2QFY07 3QFY07 4QFY07 1QFY08 2QFY08 3QFY08 4QFY08 1QFY09
    Commissioned programs 2.24 2.57 2.96 3.55 3.35 3.79 3.17 2.95 3.07
    QoQ growth %   15% 15% 20% -6% 13% -16% -7% 4%
    Volumes
    Hours 1QFY07 2QFY07 3QFY07 4QFY07 1QFY08 2QFY08 3QFY08 4QFY08 1QFY09
    Commissioned programs 298 298 264 201 205 191 234 290 277
    QoQ growth %   0% -11% -24% 2% -7% 23% 24% -4%
    Sponsored programs 221 190 187 162 142 129 130 145 130
    QoQ growth %   -14% -1% -13% -12% -10% 1% 12% -10%
    Total 519 487 451 363 347 319 364 435 407
    Performance
    Balaji's programs out of top 25 (top 50*) 29* 18 20 14 24* 11 18* 19* 11

  • Balaji faced cost pressures during 1QFY09 as compared to the corresponding quarter last year as is evident from 3.5% increase (as percentage of sales) in the cost of production & telecast fees.

    Cost break-up
    (Rs m) 1QFY08 1QFY09 Change
    Staff Cost 30 39 30.3%
    % sales 4.1% 4.3%  
    Cost of Production & Telecast Fees 345 457 32.2%
    % sales 46.3% 49.8%  
    Other expenditure 75 102 37.2%
    % sales 10.0% 11.2%  
    Total cost 450 598 32.9%
    % sales 60.4% 65.3%  

  • Balaji invested Rs 61.6 m in production & post-production equipments and studios during the quarter. Three new studios became operational.

    Channel wise revenue
    Rs m 1QFY08 1QFY09
    Star, Zee, Sony & 9X 685 849
    % of total 92% 93%
    Sun 17 22
    % of total 2% 2%
    Gemini 20 25
    % of total 3% 3%
    Udaya 13 15
    % of total 2% 2%
    DD/Others 0 2
    % of total 0% 0%
    Surya 10 4
    % of total 1% 0%
    Total 745 916

  • Balaji’s wholly owned subsidiary, Balaji Motion Pictures, released one movie, SarkarRaj, during 1QFY09. While it released ‘Mission Istaanbul’ on July 25, two new film projects i.e. ‘EMI’ and ‘C Kkompany’, will be released in the next 4 months.

What to expect?
While Balaji has grown in volumes terms and declined in realisations on a YoY basis, it’s the opposite on a QoQ basis. The all-important commissioned programming category has witnessed a growth in realisations and a decline in volumes on a QoQ basis. Given the flux in general entertainment category on Indian TV, we think this trend is likely to continue, as Balaji will remain an important player, concentrating on higher margin programming (in new genres on new channels) rather than expanding volumes (in soaps on old channels in new time slots).

At the current price of Rs 178, the stock is trading at a multiple of 10 times its estimated FY11 earnings. We hold a positive view on the stock.

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