Multi Baggers

Shemaroo Entertainment Ltd

Shemaroo Entertainment Ltd (Shemaroo) is an established media content house. With a comprehensive library of top-notch content of over 2900+ titles, Shemaroo is well poised to take advantage of the explosive growth expected in digital media.

Our optimism regarding the company's prospects is based on the following:

Shemaroo's TV broadcast syndication segment is expected to grow at a steady three year 18 percent CAGR to Rs 318 crore by FY17. Shemaroo has the largest catalogue of movie library which includes marquee Bollywood movies such as Mughal-e-Azam, Golmaal, Jab We Met and Don. It is thus well equipped to meet the broadcaster's increased requirement for quality content post digitization.

We expect Shemaroo's new media segment to grow at a three year CAGR of 38 percent to Rs 65 crore by FY17. Shemaroo's channels are among the top viewed Indian channels on YouTube. With digital media set for explosive growth, driven by the roll out of 4G broadband, increasing internet penetration and rising popularity of YouTube, the new media segment is expected to be the company's growth engine in the coming years.

Shemaroo has in place a sound content acquisition strategy which largely de-risks its model. By purchasing movie rights in the latter half of a movie's life span, Shemaroo eliminates the risk of uncertainty associated with its performance.

We expect Shemaroo to report a three year revenue CAGR of 20 percent to Rs 455 crore by FY17. We expect PAT to increase at a 3 year CAGR of 37 percent to Rs 70 crore in FY17. We initiate coverage on Shemaroo as a BUY with a Price Objective of Rs 309 representing a potential upside of 70 percent over a period of 24 months.

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