MOSL: ENTERTAINMENT NETWORK INDIA (Buy)-Subdued quarter, but upbeat outlook

Entertainment Network India: Subdued quarter, but upbeat outlook

(ENIL IN, Mkt Cap USD0.4b, CMP INR645, TP INR800, 24% Upside, Buy)

• Hit by weak Solution biz and shift of festive season: ENIL’s revenue/EBITDA 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. The launch of batch-2 stations (which incurred a loss of INR15m), too, took a toll on the performance. 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. 
• 1HFY19 performance: Revenue/ EBITDA/adj. PAT grew 6%/22%/112% YoY. EBITDA margin expanded 300bp YoY to 23%. For 2HFY19, we expect revenue/EBITDA/adj. PAT to grow 26%/34%/72%% YoY.
• Old stations disappoint; new stations – a savior: Despite a low base (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 25.5%. Contrary to this, new batch-1 (Phase III) stations continued to report a stellar performance – revenue up 53% YoY to INR216m, with the margin at 11% (v/s -12.7% in 2QFY18). However, this was partly offset by INR15m loss on the launch of 10 batch-2 (Phase III) stations.