Value buys
Entertainment Network India – steady revenue growth
Entertainment Network India has continued on its robust growth path
despite a weak ad market through innovation and improved offerings.
We expect the company to report 11% revenue growth, driven by
higher volume. EBITDA margin is expected at a healthy 35%, about
50bp higher YoY, on account of operating leverage. With limited free
capacity, we expect it to drop low-yield clients and improve ad rates.
TRAI’s upcoming recommendation on license renewal and phase III
hold key to growth opportunity.
Navneet Publication – shift of gov orders to Q4 to impact sales
Navneet Publication should face pressure on top line in Q3FY14, due
to the absence of INR 20mn in government orders awarded in
Q2FY14. However, the company has received clearance from the
government, and orders should be received in Q4FY14, thus
compensating for flat growth expected in Q3FY14. If we were to
exclude government orders, revenue would grow at 15%. Increased
competition in the stationery segment should lower revenue and
impact EBITDA significantly, leading to a sharp fall in EBITDA of 62%
YoY. However, this should be offset in Q4FY14. Management is
confident of 15% growth over the next 2-3 years, owing to the
syllabus change schedule until FY16. We believe the stock is valued
attractively based on 9.7x FY15E earnings, given its asset-light balance
sheet, consistent FCF, robust 25%-plus return ratios and no macro risk.
TTK Prestige – macro concerns, given lack of growth drivers
TTK is battling several issues like power shortages in Tamil Nadu,
geopolitical concerns in Andhra Pradesh, and the government’s policy
to increase cap of subsidized LPG cylinders to 9 from 6, affecting
revenue. We expect top line to decline by 6.5%, with about 100bp
margin contraction, leading to a 22% YoY drop in PAT. With limited
signs of new product categories launches, the company should face
growth issues over the next 2-3 years. The stock is trading at 29x
FY15E earnings despite deteriorating financials.
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Entertainment Network India – steady revenue growth
Entertainment Network India has continued on its robust growth path
despite a weak ad market through innovation and improved offerings.
We expect the company to report 11% revenue growth, driven by
higher volume. EBITDA margin is expected at a healthy 35%, about
50bp higher YoY, on account of operating leverage. With limited free
capacity, we expect it to drop low-yield clients and improve ad rates.
TRAI’s upcoming recommendation on license renewal and phase III
hold key to growth opportunity.
Navneet Publication – shift of gov orders to Q4 to impact sales
Navneet Publication should face pressure on top line in Q3FY14, due
to the absence of INR 20mn in government orders awarded in
Q2FY14. However, the company has received clearance from the
government, and orders should be received in Q4FY14, thus
compensating for flat growth expected in Q3FY14. If we were to
exclude government orders, revenue would grow at 15%. Increased
competition in the stationery segment should lower revenue and
impact EBITDA significantly, leading to a sharp fall in EBITDA of 62%
YoY. However, this should be offset in Q4FY14. Management is
confident of 15% growth over the next 2-3 years, owing to the
syllabus change schedule until FY16. We believe the stock is valued
attractively based on 9.7x FY15E earnings, given its asset-light balance
sheet, consistent FCF, robust 25%-plus return ratios and no macro risk.
TTK Prestige – macro concerns, given lack of growth drivers
TTK is battling several issues like power shortages in Tamil Nadu,
geopolitical concerns in Andhra Pradesh, and the government’s policy
to increase cap of subsidized LPG cylinders to 9 from 6, affecting
revenue. We expect top line to decline by 6.5%, with about 100bp
margin contraction, leading to a 22% YoY drop in PAT. With limited
signs of new product categories launches, the company should face
growth issues over the next 2-3 years. The stock is trading at 29x
FY15E earnings despite deteriorating financials.
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