Buy Entertainment Network (India); target of Rs 836: Prabhudas Lilladher

Prabhudas Lilladher's research report on Entertainment Network (India)

Entertainment Network India Ltd (ENIL's) topline declined 2.2% YoY to Rs1,225.3mn despite a favorable base (inventory volume was low in 2QFY18 due to self-imposed caps) on account of shift in festive season (revenue deferment of Rs120-140mn) to 3QFY19. The growth in radio business (ex of non-FCT) was 6.8% YoY and a bit of a disappointment considering Music Broadcast Ltd (MBL) reported 5.7% YoY growth on a normalized base. EBITDA margins declined 40 bps YoY to 22.3% due to 1) losses of Rs15mn on batch 2 stations 2) higher programming cost of Rs10mn (revenue is not fully recognized and cost is front loaded) 3) onetime cost of Rs4mn on some strategic non-FCT project and 4) barter revenue deferment of Rs6mn. We keep our revenue estimates unchanged given delayed festive impact and seasonality (~57-58% of total revenue is recognized in 2H due to back ended revenue accretion in the non-FCT business). However, we reduce our EBITDA estimates by 6% and 1% in FY19E and FY20E amid higher expected share of non-FCT business which is margin dilutive than traditional FCT business. We expect sales and PAT to grow at a CAGR of 15.0% and 61.2% over FY18-20E. We value the stock at 18.5x FY20 EBITDA of Rs2bn to arrive at per share value of Rs837 per share.

Outlook

Our DCF enabled per share value stands at Rs835 per share. We arrive at blended TP (50% weight to each methodology) of Rs836 per share. Maintain BUY.