Dq Entertainment (International) Net Income jumped on 252% and EBITDA Margin jumped on 16.8 pp from 50.5% to 67.3%

30-05-2016 • About Dq Entertainment (International) ($DQE) • By InTwits

Dq Entertainment (International) reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:

Dq Entertainment (International) has low CAPEX intensity: 5 year average CAPEX/Revenue was 2.4%. At the same time it's in pair with industry average of 1.5%
CAPEX is quite volatile: ₹65m in FY2016, ₹8m in FY2015, ₹0m in FY2014, ₹47m in FY2013, ₹124m in FY2012
The company has potentially unprofitable business model: ROIC is 6.9%
It operates with high leverage: Net Debt/EBITDA is 3.9x while industry average is 1.1x

Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

The company's Revenue jumped on 15.4%. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin jumped on 37.0 pp from 19.5% to 56.5% in FY2016.

Net Income margin surged on 32.1 pp from -13.8% to 18.2% in FY2016.

Investments (CAPEX, working capital and M&A)

In FY2016 Dq Entertainment (International) had CAPEX/Revenue of 4.0%. CAPEX/Revenue increased slightly on 1.9 pp from 2.0% in FY2013 to 4.0% in FY2016. Average CAPEX/Revenue for the last three years was 1.5%. During FY2012-FY2016 CAPEX as a % of Revenue bottomed in FY2014 at 0.017% and was growing since that time.

Return on investment

The company operates at low ROIC (6.9%) and ROE (6.3%). ROIC increased on 3.6 pp from 3.4% to 6.9% in FY2016. ROE surged on 10.4 pp from -4.1% to 6.3% in FY2016. During FY2012-FY2016 ROIC bottomed in FY2015 at 3.4%.

Leverage (Debt)

Debt level is 3.9x Net Debt / EBITDA and 4.1x Debt / EBITDA. Net Debt / EBITDA dropped on 1.1x from 5.0x to 3.9x in FY2016. Debt increased on 4.8% while cash dropped on 72.7%. During FY2012-FY2016 Net Debt/EBITDA topped in FY2015 at 5.0x.

Dq Entertainment (International) has short term refinancing risk: cash is only 10.7% of short term debt.

Valuation and dividends

The company's trades at EV/EBITDA 5.8x and P/E 6.9x while industy averages are 17.8x and 21.9x. The company's EV/(EBITDA-CAPEX) is 6.2x with the industry average at 22.8x.

Financial and operational results

Dq Entertainment (International) ($DQE) key annual financial indicators

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	2,272	2,294	2,397	1,423	1,643	15.4%
EBITDA	949	1,120	963	719	1,106	53.8%
Net Income	330	373	428	-197	299
Balance Sheet
Cash	250	3	11	747	204	-72.7%
Short Term Debt	1,132	1,058	1,273	1,560	1,916	22.9%
Long Term Debt	839	1,095	1,390	2,784	2,635	-5.4%
Cash flow
Capex	124	47	0	8	65	708.6%
Ratios
Revenue growth	9.3%	1.0%	4.5%	-40.6%	15.4%
EBITDA growth	25.6%	18.1%	-14.0%	-25.3%	53.8%

EBITDA Margin	41.8%	48.8%	40.2%	50.5%	67.3%	16.8%
Net Income Margin	14.5%	16.3%	17.8%	-13.8%	18.2%	32.1%
CAPEX, % of revenue	5.5%	2.0%	0.0%	0.6%	4.0%	3.4%

ROIC	9.4%	9.3%	6.2%	3.4%	6.9%	3.6%
ROE	8.8%	9.0%	9.1%	-4.1%	6.3%	10.4%
Net Debt/EBITDA	1.8x	1.9x	2.8x	5.0x	3.9x	-1.1x

Peers in Movies & Entertainment

Below you can find Dq Entertainment (International) benchmarking vs. other companies in Movies & Entertainment industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Saregama India ($SAREGAMA)	-	16.1%	-4.6%	5.1%	18.7%
Shemaroo Entertainment ($SHEMAROO)	-	18.0%	23.2%	21.7%	16.2%
Eros International Media ($EROSMEDIA)	-	13.1%	6.2%	25.3%	11.4%
Media Matrix Worldwide ($MMWL)	-	-	-	-	-
Tips Industries ($TIPSINDLTD)	-	-	-	-	-33.1%
Median (6 companies)	53.5%	17.0%	9.5%	13.4%	11.4%
Dq Entertainment (International) ($DQE)	-	1.0%	4.5%	-40.6%	15.4%

Top companies by EBITDA margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Eros International Media ($EROSMEDIA)	61.2%	65.7%	67.6%	61.2%	60.8%
Picturehouse Media ($PICTUREHS)	-	-	-	54.1%	-
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%	17.3%
Shemaroo Entertainment ($SHEMAROO)	28.4%	27.3%	24.8%	27.1%	29.4%
Median (10 companies)	15.0%	24.8%	24.8%	22.6%	19.6%
Dq Entertainment (International) ($DQE)	41.8%	48.8%	40.2%	50.5%	67.3%

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 ($SAREGAMA)	2.7%	3.4%	4.3%	1.8%	3.3%
Shemaroo Entertainment ($SHEMAROO)	2.3%	0.9%	0.7%	0.7%	1.3%
Picturehouse Media ($PICTUREHS)	-	-	-	0.5%	-
Median (6 companies)	8.1%	3.4%	2.5%	1.3%	2.3%
Dq Entertainment (International) ($DQE)	5.5%	2.0%	0.0%	0.6%	4.0%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Shemaroo Entertainment ($SHEMAROO)	23.5%	22.9%	21.0%	21.8%	21.3%
Eros International Media ($EROSMEDIA)	18.4%	15.2%	17.6%	17.7%	14.1%
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 ($SAREGAMA)	4.1%	1.7%	8.2%	3.4%	5.1%
Median (13 companies)	2.1%	7.3%	10.6%	8.4%	9.6%
Dq Entertainment (International) ($DQE)	9.4%	9.3%	6.2%	3.4%	6.9%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Picturehouse Media ($PICTUREHS)	6.2x	3.7x	3.4x	7.0x	0.0x
Prime Focus ($PFOCUS)	1.9x	3.5x	-	3.6x	-
Sri Adhikari Brothers Television Network ($SABTN)	16.1x	3.5x	2.5x	3.0x	-
Shemaroo Entertainment ($SHEMAROO)	1.7x	1.9x	2.3x	1.2x	1.8x
Eros International Media ($EROSMEDIA)	0.5x	0.5x	0.4x	0.4x	0.4x
Median (9 companies)	2.4x	2.7x	0.4x	0.4x	0.0x
Dq Entertainment (International) ($DQE)	1.8x	1.9x	2.8x	5.0x	3.9x

Dq Entertainment (International) stock price chart

Dq Entertainment (International) financials

mln.	FY2010	FY2011	FY2012

Revenue	1,615	2,078	2,272
EBITDA	629.1	755.6	948.8
Net income	266.7	278.6	330.2
CAPEX	298.3	1,635	124.4
Debt	588.9	1,587	1,971
Cash	192.7	297.0	250.5

About Dq Entertainment (International)

DQ Entertainment (International) Limited provides animation production services for television and film production companies worldwide. The company operates through Animation and Distribution segments. It also provides training services for the production of animation television series and movies, as well as licenses programmed distribution rights to broadcasters, television channels, and home video distributors. In addition, the company produces animation and visual effects for feature films and television, video in 2D and 3D, and video in digital animation; and produces assets and full motion video creations for next generation console, PC, mobile, and online games, as well as develops and produces various TV features. Further, it is involved in asset creation; production of environments, props, characters, vehicles, and weapons, as well as animation FMV, cinematic, cut scenes, Mocap animation, and Mocap Cleanup; optimization of assets; creation of low and medium LOD assets; digital paint work; and game programming for mobile, PC, and online games. The company was incorporated in 2007 and is based in Hyderabad, India. DQ Entertainment (International) Limited is a subsidiary of DQ Entertainment (Mauritius) Limited.