Dq Entertainment Net Income dropped on 138% in 2015 and Revenue dropped on 23.7%

28 May 2015 • About Dq Entertainment ($DQE) • By InTwits

Dq Entertainment reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:

• Dq Entertainment has medium CAPEX intensity: 5 year average CAPEX/Revenue was 6.4%. At the same time it's a lot of higher than industry average of 4.2%.
• CAPEX is quite volatile: 84 in FY2015, 0 in FY2014, 47 in FY2013, 154 in FY2012, 387 in FY2011
• The company has potentially unprofitable business model: ROIC is at 7.0%
• It operates with medium-size leverage: Net Debt/EBITDA is 2.8x while industry average is 2.7x

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

Dq Entertainment ($DQE) key annual financial indicators

mln. INR	2011	2012	2013	2014	2015	2015/2014
P&L
Revenue	2,064	2,265	2,294	2,397	1,828	-23.7%
Gross Profit	563	790	905	1,021	779	-23.7%
SG&A			154		294
EBITDA	753	968	1,129	1,495	1,080	-27.8%
Net Income	191	281	296	327	-125	-138.2%
Balance Sheet
Cash	713	632	42	28	825	2,846.4%
Short Term Debt	669	1,103	1,045	1,255	1,241	-1.1%
Long Term Debt	189	616	719	967	2,589	167.7%
Cash flow
Capex	387	154	47	0	84
Ratios
Revenue growth	18.4%	9.7%	1.3%	4.5%	-23.7%
EBITDA growth	13.6%	28.5%	16.6%	32.4%	-27.8%
Gross Margin	27.3%	34.9%	39.5%	42.6%	42.6%	0.0%
EBITDA Margin	36.5%	42.8%	49.2%	62.4%	59.1%	-3.3%
Net Income Margin	9.2%	12.4%	12.9%	13.6%	-6.8%	-20.5%
SG&A, % of revenue			6.7%		16.1%	16.1%
CAPEX, % of revenue	18.8%	6.8%	2.0%	0.0%	4.6%	4.6%
ROIC	8.2%	9.3%	8.9%	12.1%	7.0%	-5.1%
ROE	5.6%	7.7%	7.3%	7.0%	-2.6%	-9.6%
Net Debt/EBITDA	0.2x	1.1x	1.5x	1.5x	2.8x	1.3x

Revenue and profitability

The company's Revenue dropped on 23.7% in FY2015. Revenue decline was worsened by EBITDA margin decline. EBITDA Margin decreased on 3.3 pp from 62.4% to 59.1% in FY2015.

Gross Margin showed almost no change in FY2015.

Net Income marign dropped on 20.5 pp from 13.6% to -6.8% in FY2015.

Capital expenditures (CAPEX) and working capital investments

The company's CAPEX/Revenue was 4.6% in FY2015. CAPEX/Revenue decreased on 2.2 pp from 6.8% in FY2012 to 4.6% in FY2015.

Return on investment

The company operates at low but positive ROIC (6.98%) and negative ROE (-2.60%). ROIC decreased on 5.1 pp from 12.1% to 7.0% in FY2015. ROE decreased on 9.6 pp from 7.0% to -2.6% in FY2015.

Leverage (Debt)

Debt level is 2.8x Net Debt / EBITDA and 3.5x Debt / EBITDA. Net Debt / EBITDA jumped on 1.3x from 1.5x to 2.8x in FY2015. Debt jumped on 72.4% in FY2015 while cash surged on 2,846% in FY2015.

Appendix 1: Peers in Media

Below we provide Dq Entertainment benchmarking against other companies in Media 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	FY2011	FY2012	FY2013	FY2014	FY2015
Porta Communications ($PTCM)		970.2%	10.7%	150.9%
Grupo Clarin Sa ($GCLA)	22.2%	21.4%	24.6%	39.8%
Tangent Communications ($TNG)		-3.0%	11.8%	11.3%	-2.9%
Haynes Publishing Group ($HYNS)	-1.7%	-8.9%	-7.3%	6.0%
Naspers ($NPSN)	28.2%	15.7%	10.2%	4.8%
Median (16 companies)	0.0%	-3.0%	-6.6%	1.0%	-2.9%
Dq Entertainment ($DQE)		9.7%	1.3%	4.5%	-23.7%

Top companies by Gross margin, %

Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Porta Communications ($PTCM)	96.1%	55.3%	89.2%	83.4%
Jaywing ($JWNG)	80.5%	79.8%	76.8%	81.0%
Brainjuicer Group ($BJU)	77.6%	77.2%	78.0%	78.8%
Tangent Communications ($TNG)	49.0%	54.5%	57.6%	60.3%	58.8%
Mood Media Corp ($MM.)	61.6%	58.6%	54.4%	53.9%
Median (16 companies)	44.7%	42.5%	43.4%	44.0%	58.8%
Dq Entertainment ($DQE)	27.3%	34.9%	39.5%	42.6%	42.6%

Top companies by EBITDA margin, %

Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Haynes Publishing Group ($HYNS)	30.2%	25.7%	23.4%	38.8%
Quarto Group Inc ($QRT)	19.9%	20.0%	25.9%	27.8%
Grupo Clarin Sa ($GCLA)	26.5%	24.5%	23.7%	25.7%
Brainjuicer Group ($BJU)	15.8%	10.6%	16.4%	19.2%
Avesco Group ($AVS)	14.6%	16.9%	8.1%	14.9%
Median (15 companies)	9.3%	11.7%	9.7%	10.9%	8.2%
Dq Entertainment ($DQE)	36.5%	42.8%	49.2%	62.4%	59.1%

Top companies by CAPEX/Revenue, %

Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Avesco Group ($AVS)	14.3%	22.7%	13.2%	18.6%
Grupo Clarin Sa ($GCLA)	15.9%	12.2%	13.2%	12.8%
Mood Media Corp ($MM.)	7.0%	8.6%	6.4%	6.9%
Trader Media East ($TME)	5.0%	4.6%	3.1%	3.8%
Porta Communications ($PTCM)	10.5%	2.2%	2.0%	2.7%
Median (15 companies)	1.8%	2.2%	2.0%	2.1%	3.2%
Dq Entertainment ($DQE)	18.8%	6.8%	2.0%	0.0%	4.6%

Top companies by ROIC, %

Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Brainjuicer Group ($BJU)	47.0%	24.3%	49.0%	60.0%
Grupo Clarin Sa ($GCLA)	21.7%	21.6%	21.8%	29.8%
Independent News & Media ($INM)	-3.0%	-43.9%	136.2%	29.6%
Haynes Publishing Group ($HYNS)	20.1%	12.8%	9.4%	12.5%
Quarto Group Inc ($QRT)	9.2%	9.7%	8.9%	10.2%
Median (17 companies)	3.3%	5.4%	2.8%	2.1%	3.7%
Dq Entertainment ($DQE)	8.2%	9.3%	8.9%	12.1%	7.0%

Top companies by Net Debt / EBITDA

Top 5	FY2011	FY2012	FY2013	FY2014	FY2015
Johnston Press ($JPR)		5.8x		11.4x
Mood Media Corp ($MM.)	6.7x	5.2x	8.1x	8.2x
Porta Communications ($PTCM)				3.4x
Jaywing ($JWNG)	0.2x	0.7x	0.7x	3.3x
Independent News & Media ($INM)			0.8x	2.9x
Median (12 companies)	0.8x	1.4x	0.8x	1.3x	-0.7x
Dq Entertainment ($DQE)	0.2x	1.1x	1.5x	1.5x	2.8x

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