**[investwise]** UTV Software-Outperformer (Morgan Stanley)

 

UTV Software-A Bouquet Of Entertainment     Investment conclusion: We maintain our OW rating on the stock since: a) the solid pipeline of movies over F11-F12 should generate a healthy earnings stream; b) release of own IP by late CY10 in gaming should enable UTV's footprint into a new high growth gaming industry and lead to monetization of investments done till date; and c) broadcasting operations should turn profitable in F11. Our new PT of Rs540 implies upside potential of 16% from current levels.   Attractive Slate of Films; Launch of Games - Key Drivers: We estimate an EBIT CAGR of 123% over F10-F12e, largely driven by strong performance from the films and gaming segments. The upcoming slate of movies and television shows should be received well by the audience, in our view.   The Broadcasting business should turn profitable in F11 as the investments made in the five channels result in the desired reach. The stock is trading at an EV/EBITDA of 12.8x/9.1x on our F11e/F12e forecasts, which we think does not fully reflect the earnings growth ahead.   What's new: We have reduced our F11e and F12e EPS by 32% and 36%, respectively, primarily due to reduced expectations from the gaming division. We now build in console game sales of 1.5m units (vs. 3m unit sales previously) since we believe only 1 IP will be released in F11 (compared with 2 previously).   What's next: Success in the release of films like Udaan, Peepli Live, Gujarish and Saat Khoon Maaf in F11 and the own IP EI Shaddai should be the next triggers for the stock, in our view. Safe Harbor Statement: Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.   Nothing in this article is, or should be construed as, investment advice.

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