MOSL: ENT.NETWORK (Neutral)- New stations to drive earnings growth
​Ent.Network:New stations to drive earnings growth
(ENIL IN, Mkt Cap USD0.6b, CMP INR833, TP INR910, 9% Upside, Neutral)
PAT impacted by new station cost: Revenue declined 3% YoY to INR1.3b (in-line) due to the impact of GST, demonetization-led weak ad market, and inability to drive volumes at steep price hikes. EBITDA rose 23% YoY to INR284m (7% beat), led by a 44% YoY plunge in marketing expenses (the base quarter had a new station launch-related peak ad cost), partly offset by a 20% YoY rise in employee cost (related to new stations). PAT declined 24.5% YoY to INR60m (9% miss) on higher depreciation and lower interest income related to new stations launch.
Steep price hikes fail to drive growth at legacy stations: ENIL's intentional ad volume reduction at legacy stations (to improve listenership) with a corresponding price increase has seen low response from advertisers. Consequently, legacy stations witnessed de-growth (-10% YoY) for the second consecutive quarter. However, new stations recorded revenue of INR142m (11% of overall revenue) and 21% capacity utilization, while their EBITDA loss came down to INR18m from INR44m in the previous quarter.
Uncertain growth outlook: Although an improvement in the ad market may support growth, management's current strategy of steep price hikes at old stations could lead to continued loss of market share, as evident from higher growth posted by smaller peers. We believe ENIL may soften stance and increase inventory to partially cushion this impact. This, coupled with breakeven of new stations by 4QFY18, should drive earnings. We cut revenue/EBITDA by 4%/3% for FY18E. With complete ramp-up of new stations, we expect 29% EBITDA 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.
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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