Hold Entertainment Network India; target of Rs 545: ICICI Direct

ICICI Direct's research report on Entertainment Network India

ENIL reported 10.3% YoY revenue growth to Rs 175.8 crore in Q4FY19. Overall revenue growth for the quarter, was largely aided by non-radio business (grew 26% YoY to Rs 75.8 crore) while radio revenues were flat at Rs 100 crore vs. high single digit growth recorded by peers during the quarter). EBITDA growth of 21.8% YoY for the quarter was aided by ~15.8% YoY decline in employee expenses (reversal of provisions pertaining to variable pay, on non-achievement of certain internal targets). EBITDA margins improved 231 bps YoY to 24.5%. PAT increased 64% YoY to Rs 19.4 crore, aided by superior performance at EBITDA level.

Outlook

The fact that overall growth expectations of radio industry has tapered down to 8-10% CAGR vs. erstwhile expectations of 14-15% growth coupled with consistent lower growth trajectory of ENIL in core radio segment is concerning. The scaling up of non-FCT business, though is a positive move but is exposed to risks of losses in events. We would wait before the said segment expands on profitability on consistent front. Hence, we downgrade our rating to HOLD with a revised DCF based target price of Rs 545, (implying ~10x FY21E EV/EBITDA).