Buy Entertainment Network; target of Rs 800: ICICI Direct

ICICI Direct's research report on Entertainment NetworkENIL reported 9.0% YoY revenue growth to Rs 110.8 crore, lower than our expectation of Rs 115.6 crore. The miss was due to a decline in non-core radio revenues owing to a shift in planned activities and some base effect, hence, diluting the overall revenue decline. Core radio revenues experienced a 21.5% YoY increase led by volume growth of 23.0% YoYENIL being the largest and most profitable player in the radio industry is well placed to capitalise on leadership after the phase III radio frequency auctions. Moreover, with a stark difference in advertisement rates (Rs 10700 per 10 second slot for ENIL vs. Rs 120000 to a leading GEC) and wider reach than television, advertisement revenue for radio is expected to grow at a much more rapid pace. While new channel launches in phase III are expected to pressurise margins in FY17E, ENIL, being a leader, is expected to be a key beneficiary of the expanding reach. ENIL also indicated aggressive participation in the upcoming batch of auctions subject to fulfilment of certain conditions. Though there will be short-term pressures owing to new station launches, growth prospects that come in owing to this new inventory remains unquestioned. We maintain BUY rating with DCF based target price of Rs 800. MIB’s approval in favour of ENIL and stronger traction in new channels would be an upside risk to our estimates. For all recommendations, click here Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.