Balaji Telefilms

Balaji Telefilms
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs427
Current market price: Rs262

Raring to go

Result highlights

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Balaji Telefilms Ltd's (BTL) operating performance for Q3FY2008 was below our expectations. The programming hours in the commissioned category increased to 233.5 hours during the quarter from 190.5 hours in Q2 with the launch of three new shows during the quarter. However, much lower realisations on these shows led to a more-than-expected decline in the blended realisations in the commissioned category to 31.7 lakh per hour.
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The revenues for the quarter increased by 2.6% quarter on quarter (qoq) to Rs80 crore. The operating profit margin (OPM) declined to 33.2% in Q3FY2008 against a hefty 42.4% in Q2FY2008 due to lower blended realistions during the quarter. However, we believe this is a normal feature of the television content business wherein realisations pick up as the show stabilises over a period of time. The net profit for the quarter thereby declined by 28.4% qoq and 13.6% year on year (yoy) to Rs18.8 crore.
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BTL has pounced on the opportunity provided by the increasing content demand in the Hindi general entertainment channel (GEC) space due to new channel launches. It has launched three new shows during the quarter—Kahe Naa Kahe and Kya Dil Main Hai on 9x and Kuchh Is Tarah on Sony. In the coming quarters, the company is looking at diversifying into reality shows. The management has hinted at launching two more shows (one of which will be on NDTV Imagine), a reality show and a soap in the coming quarter.
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The launch of its Tamil and Telugu channels through its joint venture (JV) with Star has been delayed due to procedural issues, and we expect these channels to be launched only by Q1FY2009 end. We believe that the JV presents immense potential for value creation for BTL and consequently for its shareholders.
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We remain positive on the television content and film businesses of BTL and its foray into regional entertainment that would enable it to grow from a TV content provider to a broadcaster. We maintain our sum-of-the-parts (S-O-T-P) price target at Rs427.