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Balaji Telefilms

Balaji Telefilms : Lower volumes due to discontinuation of Star programs and FWICE strike lead to crash in revenues. Higher costs of production and deteriorating pricing power for content players crunch profitability. Balaji Telefilms has been underpinned by discontinuation of high margin programs (on Star), foray into new high budget programming, lack of scale in business, waning popularity of its content and an expected erosion of pricing power as recent GEC entrants face tough times.
Adjust earnings and price target to account for dismal Q3FY09 results and deteriorating business outlook for content players that are unable to drive scale. While the stock has corrected 36% over the last 3m, it makes us no less negative on BTL’s medium term prospects. Multiple headwinds persist and will lead to sharp declines in profitability over FY09-10E.