Balaji Telefilms Report by Sharekhan

Balaji Telefilms
Cluster: Emerging Star
Recommendation: Buy
Price target: Rs427
Current market price: Rs358

Price target revised to Rs427

Key points

Balaji Motion Pictures Ltd (BMPL) delivered two blockbusters in 2007—Shootout at Lokhandwala and Bhool Bhulaiya. Buoyed by the success of this venture, the management aims to produce and/or distribute at least ten movies a year from FY2009 as against five movies in FY2008.
While Balaji Telefilms Ltd (BTL) is adequately funded for further ramping up BMPL's movie business and though the management has not affirmed news reports of BTL divesting its stake in BMPL, there remains a strong possibility of BTL unlocking value in BMPL.
As expected, with the launch of new channels in Hindi entertainment genre, BTL is scaling up its TV content business. Kahe naa kahe was launched on 9x in November 2007, Kuchh is tara and Kya dil mein hai are to be launched on Sony (from November 26) and 9x (in December 2007) respectively.
We have revised our estimates for FY2008 and FY2009 to factor the new show launches and the management's aggressive plans for ramping up the movie business. Consequently, we are also revising our price target on the stock to Rs427 based on the sum-of-the-parts method and maintain our Buy recommendation on the stock.