We met the management of Moser Baer recently. Key takeaways:
Business Overview
Moser Baer (Moser) is the 2nd largest player in the world for optical disks (CDR/RW and DVDR/RW) with a market share of 17-18 %( as on FY06).It has presence across 82 countries in the world. Moser is the first one to launch HD-DVD technology globally. It has 5 plants in the NCR region. It is the primarily an OEM supplier to all players like Sony, HP, Phillips etc. It currently has a capacity of 3.2 bn discs p.a which includes ~ 1.7 bn discs for CD and ~1.5 bn discs for DVD. The company has a wholly owned subsidiary “Moser Baer Photo Voltaic ltd” (MBPV) which concentrates on solar power generation business by manufacturing solar cells and modules. MBPV (as on FY06) however contributes a negligible amount to the topline as well as bottomline currently. IFC holds ~12.5%, Electra - ~ 5.95%, Warburg ~33% in Moser. (Dec 06).
Recent announcements
- Moser has recently entered the INR 5 bn Indian home video market with 101 Tamil film titles. In Tamil Nadu, Moser sells its DVDs and VCDs through 7,000 point of sales. Moser sell its film VCDs for INR 28 and DVDs for INR 34. Current home video labels are priced between INR 150 and INR 400.Moser intends to spend USD 100 mn for investment in this business over the next three years. The strategy is to reach the masses. Moser expects this business to generate USD 250 mn per annum three years down the line. Moser currently owns more than 50% of Indian titles produced till date.
- Pyramid Saimira Theatre and Moser have entered into a strategic tie-up for retailing the home video format in all their theatres and also exclusively marketing all their new films under home video format. The profits arriving out of these titles will be shared equally by Moser Baer and Pyramid Saimira, including revenue generated from advertisement in VCD / DVD.
- MBPV intends to establish the world's largest thin film solar fab at Greater Noida, entailing an investment of USD 250 mn over the next three years. The thin-film will have an area of 5.7 sq mt which it claims to be the world’s largest, as the current industry benchmark is 1.5 sq mt. MBPV has inked a technology partnership with US-based Applied Materials Inc. for this project to manufacture large area thin film solar modules. Thin film solar modules are ideal for energy farms and rural applications. MBPV plans to start with solar modules capable of generating 40MW of power initially and ramp-up to 200 MW by FY10. Commercial production for 40 MW would begin from March 2008 and the revenues will start to accrue from April 2008 onwards. MBPV would initially focus on the export market, and expects USD 100 mn of revenues per annum from the project in FY08. In the first phase, the investment for capex, equipment and facility will be to the tune of USD 100 million. Of this, while 50% would come in form of debt (project finance from banks) and 30% from Moser, project accruals, and third party sources, about 20% is expected as support from Government's recently announced semiconductor policy. With the capacity going upto 80 MW this business could generate USD 250 mn of revenues.
Valuations
At CMP of INR 307, the stock trades at 36.6x its likely FY07 annualized (standalone) EPS of INR 8.3 and 7.6x its annualized (standalone) FY07 cash EPS of INR 40.