Hold Entertainment Network (India); target of Rs 483: Prabhudas Lilladher

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

We cut our PAT estimates by 17%/7% for FY20/FY21 respectively due to weak advertising environment and Ind-AS transition (PAT impact of Rs16mn in 1QY20). While traditional radio business is under pressure, increasing share of fast growing non-FCT (~42% YoY growth in 1QFY20) business will enable ENIL to register double digit top-line growth over the next 2 years. While we have always been apprehensive of non-FCT's margin dilutive/volatile nature sequential performance over the last few quarters is noteworthy. Additionally, low capex and minimal working capital needs give us comfort as risk of capital misallocation is minimal if the venture fails to deliver in the long term. We believe non-FCT in this environment acts as a perfect hedge. However, given the decline in advertising volumes
(pressure in the top 12-15 markets is higher) and bleak outlook we cut our target EV/EBITDA multiple to 9.5x (15.5x earlier; not directly comparable as EBITDA estimates have increased due to lease rental capitalization) and arrive at per share value of Rs464 per share. Our DCF enabled per share value stands at Rs502 per share.

Outlook

We arrive at blended TP (50% weight to each methodology) of Rs483 (Rs645 earlier) per share and downgrade the stock to a HOLD
(Accumulate earlier).