MOSL: ENTERTAINMENT NETWORK INDIA (Upgrade to Buy)-Ad recovery on the cards-Stock attractive after recent correction
​ENTERTAINMENT NETWORK INDIA: Ad recovery on the cards; Stock attractive after recent correction; upgrade to Buy
(ENIL IN, Mkt Cap USD0.6b, CMP INR759, TP INR910, 20% Upside, Upgrade to Buy)
We interacted with Entertainment Network India’s (ENIL) management to understand the progress in its business and the outlook going forward. Key takeways:
- Ad revenue was muted in October 2017 due to an early festive season (in 2QFY18), subdued Gujarat election ad spends, and lingering GST impact. However, we see a revival in November-December 2017 on (1) a low base of November 2016, and (2) the just-launched Karan Johar show.
- New stations (batch-1 of phase-3), which contribute 11% of revenue, should break even by 4QFY18, with capacity utilization rising from 23% to 25-30%.
- ENIL is likely to spend ~INR3b in FY19 towards (a) the acquisition of TV Today's Delhi, Mumbai and Kolkata frequencies, and (b) the next batch of phase-3 auctions. We expect new stations from TV Today to generate annual revenue of INR700m-800m in 2-3 years, up from the current ~INR300m.
- We expect 14% revenue growth in 3Q. For FY18, we estimate 4% revenue growth; breakeven of new station should drive 15% EBITDA growth. Over FY17-20, we estimate 15% revenue CAGR and 29% EBITDA CAGR.
- We value the stock at an EV of 20x FY19E EBITDA (~20% premium to Music Broadcast Ltd) and maintain our target price of INR910. Post the recent 15% correction, the stock appears attractive. We upgrade the stock to Buy.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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