May 22, 2013, 01.26 PM | Source: Moneycontrol.com
AnandRathi has recommended hold rating on Entertainment Network India with a target of Rs 260, in its May 21, 2013 research report.
, AnandRathi |
"Operating performance as expected. Entertainment Network (India) reported a stable operating performance: standalone revenue grew 10 percent yoy, EBIT and PBT were up 9 percent each. All three came in line with our expectations. However, the lower-than-expected effective tax (at 17 percent, vs estimated 29 percent) resulted in robust net profit growth of 28 percent, and a 17 percent earnings surprise. Capacity utilization rose to 93 percent, from 84 percent in 3QFY13 and 77 percent in 4QFY12. This implies 21 percent growth in inventory, against our expectation of 17 percent. We estimate utilization in the top eight stations to have touched 112 percent (management had earlier indicated headroom exists upto ~125 percent ideally). In the other 24 stations it could have reached ~87 percent."
"Pricing likely to head north from 2QFY14. Pressure on ad yields continue, as yields fell 7 percent yoy. The company has selectively hiked prices; average yields have been dragged down by change in mix (greater volumes from newer stations). Management expects meaningful price hike are likely from 2QFY14. We raise our consolidated revenue estimates just a touch as volume growth continues to be robust despite the high utilization. We have toned down our margins assumptions (factoring in the lower yields), leading to a modest earnings revision. On the back of this revision and the roll over from Sep’13 to Mar’14, our DCF-based price target is up from Rs 245 to Rs 260.”
“On the considerable cash outflows expected due to license acquisitions and renewals, we rate the stock a Hold. Our target implies an FY14e P/E of 16.3x (vs the present one-year-forward P/E of 15x). We have incorporated the estimated NPV impact of Rs 2.7bn (Rs 58 a share), due to license renewals, into our target price," says AnandRathi research report.
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