MOSL: Morning India (17/October/17)-1. Prime Focus (IC)- 2. India Strategy (Contrarian Investing)- 3. Fund Folio- 4. Bajaj Finance- 5. Colgate- 6. Federal Bank- 7. Dewan Hsg. Fin.- 8. Delta Corp
​MOrning India (17/October/17): 1. Prime Focus (IC); 2. India Strategy (Contrarian Investing); 3. Fund Folio; 4. Bajaj Finance; 5. Colgate; 6. Federal Bank; 7. Dewan Hsg. Fin.; 8. Delta Corp
Today’s top research idea
- Prime Focus (Initiating Coverage): Set to run the show; Forte in global media services to drive profitable growth
- PFL has turned into a strong media service player globally, offering visual effects, 3D animation and media-focused ERP solutions in India and abroad.
- The company turned profitable in FY17 post completion of M&A integration in FY15-16. In our view, the four M&A transactions in the last five years have allowed PFL to become a strong media service player globally. The company's position as one of the top-4 Hollywood VFX service providers and a steady order book should drive 15%/18% revenue/EBITDA CAGR over FY17-20E.
- We note that the demons of ~2.8x jump in net debt to INR13.9b and 50% equity dilution over the last five years are now behind. Improving EBITDA and lower capex requirement are expected to help generate healthy FCF, improve RoIC to 19%, and reduce net debt by ~68% to INR4.5b by FY20.
- We initiate coverage with a Buy rating and TP of INR130 (+46%), based on SOTP valuation (10x FY19E EBITDA).
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