ICICIdirect.com's report on Entertainment Network India
Technical Outlook
The share price of ENIL resolved past its major resistance marked by 2007 peak placed ~ Rs 650 levels, thereby lifting the stock into a new trajectory. The stock, which is already in a bull phase, offers fresh opportunity to ride higher avenues for medium term investors
The stock commenced its bull phase from October 2013 after dwelling in a basing pattern for over four years (June 2009 – October 2013). The awakening from a long period of hibernation triggered a structural bull phase for the stock, which is clearly visible from the below price chart. The price rallies since then are getting stronger and larger in magnitude while secondary corrections are shallow and time consuming affairs. This highlights the firm grip of bulls from a medium-term perspective and strong appetite to own the stock
We expect the stock to ride the new found momentum and remain on course towards a target of Rs 820. The measured price objective based on parity of the current up leg off March lows of Rs 590 with preceding up leg during October 2014 – January 2015 provides a target of Rs 828 levels
Fundamental Outlook
Entertainment Network (ENIL), a dominant player in the radio industry with a portfolio of 32 stations across cities is poised to benefit from the impending exponential growth in the radio industry. The growth in the radio industry would primarily stem from its wide reach and as it is the most economical mode of advertising. As per Ficci KPMG report 2014, the radio industry is expected to exhibit stellar growth of about 18.1% FY13-18E CAGR from Rs 1460 crore at the end of FY13 to about Rs 3360 crore by FY18E. We expect revenues for ENIL to grow at 14.2% CAGR in FY14-17E to Rs 566.5 crore by FY17E from Rs 384.8 crore in FY14
The radio auctions, which were so long being delayed is finally taking place as the NIA has already been issued from the Ministry. Phase III will lead to an increase in capacity of radio players and the revenue growth would be a mix of volume and yield. ENIL being a market leader and most profitable player with cash and liquid investments of about Rs 430 crore is best placed to take part in these auctions. The new stations that would be acquired in the upcoming auctions could be EPS dilutive in the shorter term. However, they would continue to benefit ENIL in the longer term
Strategy: "Buy Entertainment Network in the range of Rs 670-686 for a target of Rs 820.00 with a stop loss below Rs 595.00 on a closing basis", says ICICIdirect.com research report.
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