Tag - digital

14 Feb

Shemaroo says economic slowdown impacted business from YouTube

Update on the Indian Equity Market:

On Thursday, NIFTY closed at 12,174 (-0.2%). NIFTY50 was led by Yes Bank (+6.4%), Dr Reddy (+3.6%), and Zee (+2.6%). IndusInd Bank (-3.6%), Tata Steel (-1.8%) and NTPC (-1.7%) were the top losers. Pharma (+0.9%), IT (+0.8%) and Media (+0.6%) were the top gaining sectors. PVT BANK (-1.4%), Bank (-0.8%) and Fin Service (-0.7%) were among the losing sectors.

Excerpts from an interview with Mr Hiren Gada, CEO and CFO of Shemaroo Entertainment aired on CNBCTV18 on 12th February 2020:

  • Mr Gada said that in the next 3-4 years the company is aiming for an equal split across its digital and traditional business. This year the Company is hoping to be about one-third and two-third between digital and traditional.
  • This year the core customer base on the traditional side which is the broadcasters, faced tremendous slowdown on the ad side as well as on the new tariff orders. The content investment has been low-key and that has affected the entire ecosystem according to Mr Gada.
  • The expenses on account of new initiatives have dragged the EBITDA margins down in FY20. They are looking at the margins in the line of approximately 25% from a regular operating business.
  • Mr Gada revealed that digital operations contribute 50% of Shemaroo’s revenues, but the overall economic slowdown in the country also impacted the company’s YouTube revenues.
  • He added that the slowdown has had an effect on the Company’s capital-raising plans.
  • The Company had envisaged the new investment capex for which they were looking to raise money but looking at the current market conditions and given where the current stock price is, the Company will relook at the whole investment project and plan differently in terms of how they are taking that going forward.

Consensus Estimate: (Source: market screener website)

  • The closing price of Shemaroo was ₹ 97/- as on 13-February-20. It traded at 3.3x/ 3.0x the consensus EPS estimate of ₹ 34.5/38.3 for FY20E/ FY21E respectively.
  • Consensus target price is ₹ 280/- which implies a PE multiple of 7.3x on FY21E EPS of ₹ 38.3/-
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23 Oct

L&T Infotech: Aims to achieve double-digit growth in FY20E

Update on the Indian Equity Market:

On Tuesday, NIFTY closed 0.6% lower at 11,590 points; reversing the trend of the last 6 sessions. The whistle-blower complaint against Infosys was the talk of the day which dragged the markets down. Amongst the NIFTY 50 Stocks, DRREDDY (+3.5%) and ICICIBANK (+3.2%) were the top gainers while INFY (-16.7%), TATAMOTORS (-4.0%) with other banks dragged the NIFTY down. In the sector-wise performances, Pharma (+2.0%) and Financial Services (+1.0%) were the biggest gainers while IT (-4.8%) was the biggest loser for the day.

L&T Infotech: Aims to achieve double-digit growth in FY20E

Key takeaways from the interview of Mr Sanjay Jalona, MD & CEO L&T Infotech; dated 18th October 2019 on CNBC TV 18:

  • The old announced large deals are ramping up well. L&T Infotech (LTI) announced 3 more large deals in 2QFY20. LTI is confident of achieving a double-digit growth rate for FY20 despite a struggle in 1Q and 2Q of FY20.
  • There was a ~50 bps reduction in EBIT in 2QFY20. The wage hike for the LTI is effective in July. So, the entire hit comes in 2Q financials. The impact was ~160 bps in 2QFY20. The cost savings in visa expenses and other operational optimizations provided support of ~110 bps. The net margins were 13%, lower by ~30bps YoY.
  • LTI maintains the PAT margin guidance of ~14-15% for FY20E.
  • In the Banking & Financial Sector (BFS) sector, top clients saw budget cuts. LTI expects to see a recovery in 3QFY20.
  • In the BFS segment, LTI executed a deal of separation of a bank from a larger bank in FY19. It was a one-off assignment which provided the ~US $ 30-40 mn incremental revenue to LTI. The separation was completed successfully. But as this was a non-recurring one-off contract. This deal leads to a high base effect. Apart from that, in BFS; LTI is focussing on client-specific problems.
  • The International Monetary Fund (IMF) downgrade of the Global economic growth outlook from 3.8% to 3%; will lead to some nervousness in the industry. LTI continues to see the excitement and a pipeline in deals but the nervousness persists. LTI is not seeing any delays in projects.
  • Management expects the digital technology to drive change for the customer. Management is looking forward to stronger 2HFY20 and is very positive on FY21 as well. 

Consensus Estimate (Source: market screener website)

  • The closing price of LTI was ₹ 1,611/- as of 22-October-19. It traded at 19x/16x/14x the consensus EPS for FY20E/ FY21E/ FY22E of ₹ 86/ 100/ 112 respectively.
  • Consensus target price of ₹ 1,808/- implies a PE multiple of 16x on FY22E EPS of ₹ 112 /-
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