Entertainment Network (India) Ltd. share price target

Weak macros (GST, demon, RERA etc), mgmt focus on price hikes during this tough times and excessive emphasis on non-FCT business (in our view) has led to failure in delivery over FY17-19. This has led to sharp 50% price correction from peak. However, with moderately supportive macros ENIL can deliver healthy growth in all segments of business viz. established 35 stations, new stations (Phase III, batch I & II) and growth plus margin improvement in non-FCT business. FCF generation can thus improve materially from ~Rs 0.8bn to Rs 1.3bn by FY21E and gradually to ~Rs 1.8-2bn. Maintain faith. Entertainment Network (ENIL) 4QFY19 was in-line but weak with flat advertising revenue in core radio business (MBL 7.8%). Maintain faith. BUY with TP of Rs 696 (+37%) @ 25x FY21E P/FCFE.

should make up for overall growth. Revenue growth aside, we believe, higher utilization at old and new Batch 1 stations coupled with increased margins in the Solutions business (a margin dragger) should further drive EBITDA growth. However, this would be partly offset by initial losses in Batch 2 and the US stations; expect 28% CAGR over FY19-21. Potential gains from the...

FMCG is muted. While traditional radio business is under pressure, increasing share of fast growing non-FCT (~33% YoY growth in FY19) business will enable ENIL to register double digit top-line growth over the next 2 years. Nonetheless, we continue to remain apprehensive of renewed focus on non-FCT business due to its margin dilutive nature (~13% EBITDA margin in FY19). Low capex and minimal working capital needs are the only factors that give us comfort as risk of capital misallocation is minimal even if margins fail to meet expectations (aim is to increase non-FCT EBITDA...

ENIL's management appeared confident in scaling the non-FCT business (30% revenues) to ~50% in the next 4-5 years. While non-FCT business is margin dilutive as compared to traditional air time sale on radio, gross margins (GM) have witnessed an uptrend over the last 3 years (19% in FY17 to ~28% now). Given low capex, minimal working capital requirements and...

Reiterate faith. Maintain BUY with revised TP of Rs 632 @ 25x Dec-20E P/FCFE. In 3QFY19, ENIL reported healthy 36% revenue growth. Radio revenue (FCT) grew by 25%. Non FCT (~40% of revenue) growth excluding international concerts (loss making) was up by 12%. ENIL has consistently failed to register for several quarters either on revenue growth and/or margin. It even guides muted revenue growth in near term. This is despite impending election which will boost radio advertising. ENIL attributes weak outlook to slowdown in auto, e-commerce, real estate sectors etc.

EBITDA came in at | 40.4 crore (up 13.5% YoY), a tad lower than our expectation of | 42.3 crore while EBITDA margins came in at 20.1% vs. our expectation of 22.5%, largely owing to the international...

Reiterate BUY with a TP of Rs 736 at 25x Sept-20E FCFE/share. ENIL reported a muted 2QFY19 performance largely on account of an incomparable base, as bulk of the revenues arising out of festive season are likely to be captured in 3QFY19. Revenue/EBITDA de-grew by 2.6/3.7% YoY to Rs 1.21bn/273mn while PAT growth of ~49% is explained by the lower tax rate (31% vs 55% in 2QFY18) and a higher other income (up ~52% YoY).

Revenues came in at | 122.5 crore (declined 2.6% YoY), lower than our estimate of | 130.7 crore. Core radio revenue (~80% of revenues) grew 6.8% YoY while non-FCT business witnessed the impact of shifting of festivities EBITDA came in at | 27.3 crore, lower than our expectation of | 29.5 crore while margins came in at 22.3%, below our expectation of 22.6%. Margins were also impacted by one-offs (such as higher...

declined 2%/4% YoY (5%/7% miss) due to the shift of the festive season to 3QFY19 and the weakness in the Solution business (non-FCT); margins contracted 40bp YoY to 22.3%. Core Radio business revenue rose moderately by 6.8% YoY. However, PAT grew 50% YoY to INR89m (4% miss), led by higher net finance income and relatively low tax (v/s 2QFY18). Adjusted for the festive season shift, revenue/EBITDA were up by 8%/20% YoY. EBITDA margin expanded 300bp YoY to 23%. (2QFY18 was impacted by GST), old stations revenue declined steeply by 9% YoY to INR1,000m, mainly due to the shift of the festive season to 3Q and muted ad spends across the M&E;, real estate and auto categories. A 1% YoY drop in pricing (off a high base) accentuated the impact. Consequently, margins contracted 110bp YoY to 25.

Revenues came in at | 121.6 crore (growth of 16.5% YoY) vs. our estimate of | 120.1 crore. Ad revenue growth of 22% YoY came in the background of a low base and was aided by volume growth as no price hike was taken during the quarter EBITDA was at | 28.3 crore, better than our estimate of | 25.3 crore while margins were at 23.3%, better than our estimate of 21%, driven by new stations that turned profitable vs. losses earlier. New stations reported EBITDA of | 74 lakh vs. | 4.3 crore loss in Q1FY18...