Accumulate Entertainment Network; target of Rs 776: Emkay

Entertainment Network's Q4FY16 beat on headline numbers was driven by one-off provision write back of Rs 102mn, while underlying revenue was in-line with estimate. Higher operating expenses led to lower than expected underlying EBITDA. Revenue was at Rs 1472mn (+18.3% yoy), EBITDA at Rs 385mn grew 11.5% yoy with EBITDA margin at 26.2% (-160bps yoy). Yield improved for the quarter was 13.9% yoy. New channel launches would continue to drive marketing spends upwards, resulting in muted EBITDA growth for FY17E. Nevertheless, operating leverage would be visible from FY18E as new stations start stabilizing. We remain positive on the strong brand equity of Radio Mirchi. Retain ACCUMULATE with DCF based PT of Rs 776.

Long term outlook for ENIL remains positive given the following reasons - i) immense scope for expansion of radio broadcasting with Phase III, ii) ENIL’s free cash generation ability and iii) company’s strong brand and leadership position in most of the cities of operations. High entry fee paid for new licensee would impact RoIC but lower opex would partially offset the same. Continued cash generation from established channels to remain strong. We have not factored impact of acquisition of 3 stations (under litigation) from TV Today in our estimates.For all recommendations, click here Disclaimer: