Prabhudas Lilladher recommended accumulate rating on Entertainment Network (India) with a target price of Rs 662 in its research report dated April 16, 2019.
Prabhudas Lilladher's research report on Entertainment Network (India)
ENIL's management appeared confident in scaling the non-FCT business (30% revenues) to ~50% in the next 4-5 years. While non-FCT business is margin dilutive as compared to traditional air time sale on radio, gross margins (GM) have witnessed an uptrend over the last 3 years (19% in FY17 to ~28% now). Given low capex, minimal working capital requirements and strong talent pool of employees (350 people), non-FCT business will be a key driver even as the traditional radio business is under pressure (industry growth of 6-7% in FY19). While the non-FCT business provides diversity it has long gestation period and is cumbersome in nature, manpower intensive, requires high marketing budget and in depth knowledge about the product/geography.
Our DCF enabled per share value stands at Rs676 per share. We arrive at blended TP (50% weight to each methodology) of Rs 662 per share. We cut our rating from Buy to Accumulate.
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