DQ Entertainment IPO Analysis
Through its IPO, DQ Entertainment is planning to raise around 128 crore for its expansion plans, investments in new products, partnerships and production units. The price band for the IPO is fixed at Rs 75 to 80 per equity share of face value Rs 10. The IPO would consist of around 1.6 crore shares. The IPO opens on March 8th and closes on March 10th.
Should I Invest?
DQ has good (although limited) track record of realizing revenues from collaborations with global partners, licensing and distribution and it also has a strong order book of Rs 450 crore that provide revenue assurance for the next two years. In terms of current valuations, considering the upper price band of Rs 80, the stock is offered at P/E of 17 times its 2010-2011 estimated earnings. While there are no comparable peers in its product range, the price range seems to be fair and could provide good returns for investors who could wait for a couple of years.
DQs Business and Financials
- DQ currently follows an outsourcing service model. Its a pioneer in 2D and 3D animation movies and gaming products and has association with global leaders such as Walt Disney.
- As of March 2009, Company has generated revenue of 53 crore from co-productions, in which it has invested around Rs 47 crore. 33 more productions are currently under development.
- DQ is proposing to deploy 45% of IPO proceeds towards IP content creation businesses and co-production
- About 60% of the total revenue is curretly coming from 3D animation projects. These provide good margins to the company.
- DQ plans to go big way into creating movie content (such as 3D animation movies) and merchandise.
- DQ currently has 90% of its order book worth Rs 450 cr coming from America and Europian regions.
