MOSL: PRIME FOCUS (Buy)-Creative services to drive earnings
​Prime Focus: Creative services to drive earnings
(PRIF IN, Mkt Cap USD0.4b, CMP INR98, TP INR130, 32% Upside, Buy)
- Stupendous growth: Revenue grew 17% YoY (+6.4% QoQ) to INR5.5b. EBITDA (pre-ESOPs) increased 63% YoY (+17% QoQ) to INR1.2b, with the margin expanding 620bp YoY (+200bp QoQ). PAT (after minority) of INR260m turned positive v/s INR-428m in 2QFY17 and INR52m in 1QFY18, led by steady growth in EBITDA, partly offset by higher ESOP and forex charge.
- Creative business drives growth: Segment-wise, Creative remains the key growth driver, with 26% YoY revenue growth and an 800bp YoY EBITDA margin improvement. Tech/Tech Enabled services revenue declined 4% YoY, with a 50bp margin contraction, which is attributed to longer gestation in the international market. India FMS business remained flat, with 2% YoY revenue growth and 360bp EBTDA margin contraction.
- Healthy outlook on robust order book: We expect consolidated revenue/EBITDA CAGR of 15%/18% over FY17-20E, led by 22% EBITDA CAGR for the Creative services. With a healthy order book of over USD250m recognizable over the next 9-12 months and shifting of a high proportion of operations to low-cost centers, Creative should continue growing at a healthy pace. Tech/Tech Enabled business has seen revamped on sales and product offerings, which should drive better growth over the next 1-2 years.
Prime Focus Limited is a holding company. The Company is a media and entertainment industry services company. The Company provides end-to-end creative services, such as visual effects, stereo three dimensional (3D) conversion and animation; technology products and services, such as Media Enterprise Resource Planning (ERP) Suite and Cloud-enabled media services; production services, such as equipment rental, and post production services, such as Digital Intermediate and picture post to studios, broadcast and advertising industries. The Company's technologies include CLEAR (Hybrid Cloud technology enabled Media ERP Suite), DAX Digital Dailies and ViewD (stereoscopic two-dimensional (2D) to 3D conversion process). It has operations in Bangalore, Cape Town, Chandigarh, Delhi, Goa, Hyderabad, Johannesburg, Kolkata, London, Los Angeles, Mumbai, New York, Toronto and Vancouver. Its subsidiaries include Prime Focus Technologies Private Limited and De-fi Media Limited.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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