MOSL: ENTERTAINMENT NETWORK (INDIA) (Neutral)-Prioritizing pricing over volumes
​Entertainment Network (India): Prioritizing pricing over volumes
(ENIL IN, Mkt Cap USD0.7b, CMP INR883, TP INR928, 5% Upside, Neutral)
- Revenues muted, in-line: Revenue declined 6% YoY (-27% QoQ) to INR1,044m (bucking the industry trend, with peers reporting higher revenue) due to pullback in adspend by government (-70% YoY; 17-19% revenue contributor), M&E (-44% YoY) and real estate (-41% YoY) segments on the back of reforms like RERA, GST and demonetization. Further, management's strategy to prioritize pricing over volume in both legacy and new stations hurt ad volumes.
- EBITDA on a free fall: EBITDA declined 43% YoY (-53% QoQ) to INR167m (14% miss) led by inherent fixed cost, with the margin shrinking by a steep 10.6pp YoY (-5.3pp QoQ) to 16% (270bp miss). Despite being aided by exceptional items of INR42m (write-back of previous quarter provisions), PAT plunged 73% YoY (-68% QoQ) to INR44m.
- Expect recovery from 2HFY18: Typically, gains from price-over-volumes strategy are realized with a 1-2 quarter lag as advertisers benefit from superior platforms. The upcoming festive season (ad volumes during festive periods in previous fiscals had declined 5-10% due to inventory constraints), should drive volumes growth, in our view. Also, a lower base (demonetization effect) should support growth. We largely maintain revenue/EBITDA estimates, building 16%/31% CAGR over FY17-20E.
Entertainment Network (India) Limited is engaged in private frequency modulation (FM) radio broadcasting. The Company's principal revenue stream is advertising. The Company's advertising business includes the sale of air time in its Frequency Modulation (FM) radio broadcasting stations, activations and monetization of its media properties. The Company operates through Media and Entertainment segment. The Company operates in radio broadcasting under the brand Radio Mirchi, which is a radio station. The Company has operations in Jammu, Chandigarh, Srinagar, Ahmedabad, Hyderabad, Panaji, Bengaluru, Kolkata, Guwahati, Raipur, Kozhikode, Nashik, Kanpur, Visakhapatnam, Surat, Vijayawada, Nagpur, Shillong, Vadodara, Thiruvananthapuram, Rajkot, Patna, Coimbatore, Madurai, Kolhapur, Indore, Delhi, Jalandhar, Jabalpur, Shimla, Jodhpur, Patiala, Amritsar and Bengaluru, among others. Mirchi is also on television through properties, such as Mirchi Music Awards, Mirchi Top 20 and Spell Bee.
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