Eye on Shemaroo Entertainment as a growth stock

13-05-2016 • About Shemaroo Entertainment ($SHEMAROO) • By InTwits

Shemaroo Entertainment is a growth stock in Movies & Entertainment industry. It showed noticeble revenue performance in the last years among with attractive profitability and financial model.

Growth story

Shemaroo Entertainment showed fast growth in the last financial year. Shemaroo Entertainment's revenue surged on 16.2% in FY2016. Together with revenue growth Shemaroo Entertainment also managed to keep EBITDA growth. EBITDA grew 26.0% for the same period.

In the longer period the company showed fast revenue growth of 20.3% from FY2013 to FY2016 annually. EBITDA surged on 23.2% from FY2013 to FY2016 annually.

Shemaroo Entertainment ($SHEMAROO) financials for the last 5 years

mln. INR	FY2012	FY2013	FY2014	FY2015	FY2016
Revenue	1,820	2,147	2,646	3,219	3,740
Revenue growth, %		18.0%	23.2%	21.7%	16.2%
SG&A, %
EBITDA	517	587	657	871	1,098
EBITDA growth, %		13.7%	11.9%	32.6%	26.0%
EBITDA margin, %	28.4%	27.3%	24.8%	27.1%	29.4%
Net Income	209	234	273	409	521
Net Income margin, %	11.5%	10.9%	10.3%	12.7%	13.9%

CAPEX	42	20	19	22	49
CAPEX/Revenue, %	2.30%	0.927%	0.713%	0.688%	1.31%
Debt	928	1,102	1,512	1,060	1,956
Cash	65	11	9	25	13
Net Debt/EBITDA	1.7x	1.9x	2.3x	1.2x	1.8x

ROIC, %	23.5%	22.9%	21.0%	21.8%	21.3%
ROE, %	19.3%	17.1%	16.9%	16.6%	15.3%

Profitability and return on investment

EBITDA growth was supported by margin expansion. Shemaroo Entertainment showed EBITDA margin growth of 2.30 pp from 27.1% to 29.4% in FY2016. If we look for the longer period the company's EBITDA margin increased on 2.10 pp from 27.3% in FY2013 to 29.4% in FY2016.

We call Shemaroo Entertainment an attractive growth stock as together with the growth it delivers high ROIC at 21.3%. Three years ago it was a bit higher at 22.9%. It's average level of ROIC for the last three years was 21.4%.

Net Income margin increased on 1.20 pp from 12.7% to 13.9% in FY2016. In the last 3 years Net Income margin surged on 3 pp from 10.9% in FY2013 to 13.9% in FY2016.

Shemaroo Entertainment operates at ROE of 15.3%. It's average level of ROE for the last three years was 16.3%.

Capital expenditures (CAPEX)

In FY2016 Shemaroo Entertainment had CAPEX/Revenue of 1.31%. CAPEX/Revenue surged on 0.386 pp from 0.927% in FY2013 to 1.31% in FY2016. It's average CAPEX/Revenue for the last three years was 0.905%.

Leverage (Debt)

Having such a fast growth profile Shemaroo Entertainment keeps medium debt level at 1.8x Net Debt/EBITDA. In the longer period the company's leverage decreased slightly on 0.09x from 1.86x in FY2013 to 1.77x in FY2016.

Valuation vs. comparable companies

The company trades at 9.8x EV/EBITDA which is 60.2% lower than 24.5x Movies & Entertainment industry avearge calculated based on 56 companies. The market closed today at 16.8x P/E for Shemaroo Entertainment which is 32.5% higher than 12.7x Movies & Entertainment peer group avearge calculated on the basis of 2 companies.

Peers in Movies & Entertainment

Below we provide Shemaroo Entertainment benchmarking against other companies in Movies & Entertainment industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

Top 5
	FY2012	FY2013	FY2014	FY2015	FY2016
Prime Focus ($PFOCUS)	53.5%	-1.3%	10.8%	82.2%
Eros International Media ($EROSMEDIA)	33.5%	13.1%	6.2%	25.3%
Saregama India ($SAREGAMA)	16.9%	16.1%	-4.6%	5.1%
Dq Entertainment (International) ($DQE)	9.3%	1.0%	4.5%	-40.6%
Sri Adhikari Brothers Television Network ($SABTN)	167.5%	22.2%	11.9%	-42.6%

Median (6 companies)	16.9%	14.6%	7.2%	-17.8%
Shemaroo Entertainment ($SHEMAROO)		18.0%	23.2%	21.7%	16.2%

Top companies by EBITDA margin, %

Top 5
	FY2012	FY2013	FY2014	FY2015	FY2016
Eros International Media ($EROSMEDIA)	61.2%	65.7%	67.6%	61.2%
Picturehouse Media ($PICTUREHS)				54.1%
Dq Entertainment (International) ($DQE)	41.8%	48.8%	40.2%	50.5%
Sri Adhikari Brothers Television Network ($SABTN)	7.5%	24.7%	27.5%	43.7%
Mukta Arts ($MUKTAARTS)	6.4%	4.0%	1.0%	29.8%

Median (10 companies)	15.0%	24.8%	27.5%	24.0%
Shemaroo Entertainment ($SHEMAROO)	28.4%	27.3%	24.8%	27.1%	29.4%

Top companies by CAPEX/Revenue, %

Top 5
	FY2012	FY2013	FY2014	FY2015	FY2016
Sri Adhikari Brothers Television Network ($SABTN)	28.9%	5.1%	9.4%	126.7%
Prime Focus ($PFOCUS)	24.3%	19.8%		20.8%
Saregama India ($SAREGAMA)	2.7%	3.4%	4.3%	1.8%
Dq Entertainment (International) ($DQE)	5.5%	2.0%	0.0%	0.6%
Picturehouse Media ($PICTUREHS)				0.5%

Median (6 companies)	8.1%	3.4%	2.1%	1.2%
Shemaroo Entertainment ($SHEMAROO)	2.3%	0.9%	0.7%	0.7%	1.3%

Top companies by ROIC, %

Top 5
	FY2012	FY2013	FY2014	FY2015	FY2016
Eros International Media ($EROSMEDIA)	18.4%	15.2%	17.6%	17.7%
Picturehouse Media ($PICTUREHS)	15.6%	17.3%	16.9%	12.0%
Sri Adhikari Brothers Television Network ($SABTN)	-4.4%	7.1%	10.6%	4.8%
Saregama India ($SAREGAMA)	4.1%	1.7%	8.2%	3.4%
Dq Entertainment (International) ($DQE)	9.4%	9.3%	6.2%	3.4%

Median (13 companies)	2.1%	7.3%	8.2%	4.1%
Shemaroo Entertainment ($SHEMAROO)	23.5%	22.9%	21.0%	21.8%	21.3%

Top companies by Net Debt / EBITDA

Top 5
	FY2012	FY2013	FY2014	FY2015	FY2016
Picturehouse Media ($PICTUREHS)	6.2x	3.7x	3.4x	7.0x
Dq Entertainment (International) ($DQE)	1.8x	1.9x	2.8x	5.0x
Prime Focus ($PFOCUS)	1.9x	3.5x		3.6x
Sri Adhikari Brothers Television Network ($SABTN)	16.1x	3.5x	2.5x	3.0x
Eros International Media ($EROSMEDIA)	0.5x	0.5x	0.4x	0.4x

Median (9 companies)	2.4x	2.7x	0.4x	0.4x
Shemaroo Entertainment ($SHEMAROO)	1.7x	1.9x	2.3x	1.2x	1.8x

Shemaroo Entertainment stock price chart

Shemaroo Entertainment financials

mln.	FY2010	FY2011	FY2012

Revenue	3,860	1,582	1,820
EBITDA	195.6	353.8	516.5
Net income	3.166	136.3	209.4
CAPEX	7.151	18.226	41.825
Debt	1,062	961.3	928.2
Cash	185.8	69.631	65.423

About Shemaroo Entertainment

Shemaroo Entertainment Limited operates as an integrated media content house in India. The company is engaged in the aggregation, production, and co-production of cinematograph films, dramas, etc.; and distribution of rights of films and dramas worldwide through various medium; and exploiting rights of the content through distribution avenues, such as Internet protocol television, video on demand, and mobile platforms. It offers various types of content, which include films, music, devotional, kids/animation, motivational/spiritual, classic television serials, and health related content. The company also provides digital content and services, including ringtones, caller ring back tones, video clips, imagery content, games, applications, celebrity chats, text content, voice-based, and other services. Shemaroo Entertainment Limited distributes the content through various media, such as satellite, terrestrial, and cable television; new media platforms consisting of mobile, Internet, direct to home, and other applications; home entertainment, including Blu Ray, DVDs, and VCDs; and other media. In addition, it offers digital post-production services consisting of digital intermediate processing, digital restoration, 4K spirit data scanner telecine transfer, scanning and archiving digitally, high definition and standard definition post production, Blu Ray/DVD and VCD authoring, and format conversion. Further, the company provides content management solutions to its partners. Shemaroo Entertainment Limited was founded in 1962 and is based in Mumbai, India.