Management Meet Update

October 7, 2016
Rating matrix
Rating
Target
Target Period
Potential Upside

:
:
:
:

Mukta Arts (MUKART)

Unrated
NA
NA
NA

Multiplex screen expansion to drive revenue...

Key financials
FY13
277.1
11.1
(1.4)
(0.6)

| Crore
Net Sales
EBITDA
Net Profit
EPS (|)

FY14
308.3
3.0
(7.3)
(3.3)

FY15
131.4
36.1
(8.5)
(3.8)

FY16
88.4
13.3
(3.1)
(1.4)

FY14
NA
106.5
4.6
(4.9)
(13.9)

FY15
NA
8.9
5.6
(2.8)
(19.8)

FY16
NA
24.0
6.1
3.1
(7.8)

Valuation summary
FY13
NA
28.7
4.1
3.2
(2.3)

(x)
P/E
EV / EBITDA
P/BV
RoCE (%)
RoNW (%)

Stock data
Particular
Market Capitalization (| Crore)
Total Debt (FY16) (| Crore)
Cash (FY16) (| Crore)
EV (| Crore)
52 week H/L
Equity capital (| crore)
Face value

Amount
243.9
83.4
3.9
323.4
124/ 31
11.3
5.0

Price Chart
8,500

140
120

8,000

100

7,500

80

7,000

60
40

6,500

20

6,000

0
Dec-15

Mar-16
Price (R.H.S)

| 108

Jun-16
Nifty (L.H.S)

Research Analysts
Bhupendra Tiwary
bhupendra.tiwary@icicisecurities.com
Sneha Agarwal
sneha.agarwal@icicisecurities.com

We met the management of Mukta Arts (Mukta) to get a deeper insight

into its strategies for the coming years. Mukta was one of the leading
production houses but has now shifted its focus towards business
interests in the exhibition as well as education space.
Multiplex focus, expansion to augur well; execution remains key
The company recently reached a screen count of 49 post opening a six
screen property in Bahrain and is targeting 100 screens by FY17E.
Average ticket prices (ATPs) commanded by Mukta is in the range of
| 130-140, lower than other multiplex peers by ~15-20% owing to higher
concentration towards Tier-III cities, albeit at higher occupancy levels of
40% vs. 30-33% for peers. The company also has a lower contribution
from advertisement revenues as its screen presence is yet to attract panIndia advertisers. The Bahrain multiplex has the potential to operate at
substantially high margins of 30%+ owing to high ATPs of 4-10 BD (1 BD
is equal to | 180) and high occupancy. Mukta is targeting two more
properties in the same region. The cinema business for Mukta is expected
to garner margins of 16-17%. The high margin Bahrain multiplex would
be an upside with strong revenue potential.
The company has received Board approval to transfer the entire cinema
business under its wholly owned subsidiary Mukta A2 Cinemas on a
slump sale basis through business transfer agreement between the
company and the subsidiary. This will help increase focus on its cinema
business and also be effective for any future value unlocking.
Whistling Woods shows some improvement; litigation a concern
The company also operates film, television, animation & media school
Whistling Woods International which hosts about 800-850 students.
The company has invested ~| 100 crore till date on building state-of-theart classrooms & superior cinema equipment. The segment turned
EBITDA positive in FY16 and is a high margin segment. Mukta expects a
further turnaround in the coming year and is open to expanding into new
cities. However, the land on which the school was built is under litigation.
Any adverse outcome of the litigation would be detrimental to Mukta.
Execution to remain key monitorable; changing focus of business
Mukta Arts intends to go slow on the movie production and has also
scaled down its distribution businesses with key focus on cinema &
education. It has several real estate investments, out of which the Bandra
property would go for redevelopment and may lead to some value
unlocking. Overall margin & profitability are expected to improve as the
cinema business expands & Whistling Woods turns PAT positive. We,
however, remain wary on any adverse outcome from pending litigation.
Exhibit 1: Key Financials
| crore
Net Sales
EBITDA
PAT
EPS (|)
P/E (x)
Price / Book (x)
EV/EBITDA (x)
RoCE (%)
RoE (%)

FY12
219.7
12.9
16.5
7.3
15
3.9
24.7
(6.3)
26.2

Source: Company, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

FY13
277.1
11.1
-1.4
(0.6)
NA
4.1
28.7
3.2
-2.3

FY14
308.3
3.0
-7.3
(3.3)
NA
4.6
106.5
(4.9)
-13.9

FY15
131.4
36.1
-8.5
(3.8)
NA
5.6
8.9
(2.8)
-19.8

FY16
88.4
13.3
-3.1
(1.4)
NA
6.1
24.0
3.1
-7.8

Key Financials
Exhibit 2: Revenue, EBITDA, PAT trends
350.0
250.0

308.3

277.1

300.0
219.7

200.0
131.4

150.0

88.4

100.0
50.0
0.0
-50.0

FY12

FY13

FY14

Net Sales

FY15

EBITDA

FY16

PAT

Source: Company, ICICIdirect.com Research

Exhibit 3: Operating margins trend

Exhibit 4: Return ratios trend

30.0

30.0

27.4

25.0
15.0

15.0

10.0
5.9
FY12

FY13

(10.0)

4.0

1.0

(5.0)

10.0
(%)

(%)

20.0

5.0

FY14

26.2

20.0

3.2
-2.3
FY12 (6.3) FY13

(20.0)
FY15

FY16

(2.8)

FY14
FY15
-13.9
-19.8

3.1
FY16-7.8

(30.0)

EBITDA (%)
Source: Capitaline, ICICIdirect.com Research

(4.9)

RoCE (%)

RoE (%)

Source: Capitaline, ICICIdirect.com Research

Exhibit 5: Revenue break-up (FY16)

Other Operating
Rental Income Income
0%
9%

Whistling Woods &

Other ancillary
services
31%

Distribution and
exhibition
6%

Ticket Sales and F&B

49%

Own fi lm/ Content

production
5%

Source: FY16 Annual report, ICICIdirect.com Research

ICICI Securities Ltd | Retail Equity Research

Page 2

RATING RATIONALE

ICICIdirect.com endeavours to provide objective opinions and recommendations. ICICIdirect.com assigns

ratings to its stocks according to their notional target price vs. current market price and then categorises them
as Strong Buy, Buy, Hold and Sell. The performance horizon is two years unless specified and the notional
target price is defined as the analysts' valuation for a stock.
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;

Pankaj Pandey

Head Research

pankaj.pandey@icicisecurities.com

ICICIdirect.com Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai 400 093
research@icicidirect.com

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