Midcaps - 2014 Value Buys: ENIL, Navneet, TTK Prestige:: ELARA

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.

Strong quarter ENIL :: Centrum

Strong quarter
ENIL posted Q4FY13 results above expectations with 12.3%YoY (4% above expectations) growth in revenues on the back of 9.3%YoY ad growth. Operating profit was up by 6.4% YoY (19% above expectations) with 186bps fall in EBIDTA margin on the back of higher employee cost. Re-negotiation of the contract with T-Series and BCCL will boost margins in coming quarters. Lower tax rate on the back of savings from liquid investments boosted profitability as Adj PAT (for one time credit of tax of Rs28.6mn) was up by 16.2% YoY (31.8% above expectation). We maintain a Buy rating for the scrip with a revised target price of Rs285 (based on 16x FY15).

Results better than expectations: ENIL posted 12.3% topline growth to Rs1050mn on the back of 9.3% ad growth where events and activation contributed 33% to revenues. Operating profit was at Rs350mn up by mere 6.4%YoY on the back of higher employee cost (up 67% YoY) contracting OMP by 186bps. Adj PAT was at Rs228mn (up 16.2% YoY) due to higher other income and lower tax rate.

Ad growth momentum continues: Ad growth during the quarter was up 9.3%YoY on the back of increase in utilisation levels across stations. Blended utilisation rate was 93% with volume growth of 19% and pricing decline of 1.9%. Management has taken a rate hike in select markets and plans to hike rates across stations before the start of the festive season. Sectors such as FMCG (17% share), BFSI (14% share), retail (14% share), media & entertainment and Government/NGO posted strong growth during the quarter.

Gearing up for Phase-III ENIL :: Centrum

Gearing up for Phase-III
ENIL posted Q2FY13 results marginally below expectations on the back of
10% YoY growth on ad revenues with 2% YoY decline in pricing while
volume rose by 17.5%. Operating profit grew by mere 3.1% on the back of
margins declining by 199bps YoY due to higher marketing cost while PAT
was up by 14% due to high other income as the company has Rs2.6bn of
cash. We maintain our BUY rating on the stock.
Q2FY13 marginally below expectations: The company posted 11.5%
YoY growth in topline to Rs771mn (4.2% above our expectations) on the
back of 10% YoY ad revenue growth. Operating profit was at Rs189mn (up
mere 3.1% YoY) on the back of 199bps drop in margins while PAT was up
by 14%YoY to Rs103mn due to higher other income.
Strong ad growth in challenging environment: ENIL posted 10% YoY
growth in advertising revenue on the back of 17.5% volumes growth while
pricing was down by 2%YoY. Utilisation for legacy 10 stations was at 90%
while for the remaining stations it was best ever 76%. Blended rate was also
best ever at 72%. Sectors such as durables, real estate and auto have
bounced back adding to volume growth. The share of radio advertising in
the revenue was at 73% while the remaining was on the back of 360 degree
approach which the company took up to garner higher revenue from
clients in the form of activation & BTL activities. The management believes
that the advertisement environment has seen an up-tick in the current
festive season and the growth rates could be better going forward.

Ad growth under pressure-- ENIL :: Centrum

Ad growth under pressure
ENIL posted Q1FY13 results marginally below expectations on the back
of 9% YoY growth on ad revenues with 2.3% YoY decline in pricing.
Operating profit grew by 9.1% on the back of stable margins in a
challenging environment while PAT was up by 34% due to high other
income as the company has Rs2.4bn of cash. We believe the company is
well poised to benefit from the radio Phase-III auctions and hence
maintain our BUY rating on the stock.
Q1FY13 marginally below expectations: The company posted 9% drop
YoY in topline to Rs698mn (4.4% below our expectations). Operating
profit was at Rs201mn (up 9.1% YoY) on the back of flat margins while
PAT was up by 34.4%YoY to Rs130mn due to higher than expected other
income.
Ad growth under pressure: Company posted 9% growth YoY in
advertising revenue on the back of volumes growth. Utilisation for legacy
10 stations was at 86% while for the remaining station it was at 62%.
Blended rate was 68%. The company posted 2.8%YoY drop in pricing due to
the economic slowdown. Sectors such as FMCG and Government are high
volume clients but low on pricing which impacted price growth. Sectors like
BFSI, telecom, durables remained weak during the quarter while Media and
Auto continued to show strong growth. The management maintained that
clients needed 360 degree approach and hence activation and BTL activities
gained prominence during the quarter. Activation contributed to 16% of
the revenues for Q1FY13. The management maintained that the
advertisement environment remained challenging for coming quarters.

ENIL (ENIL IN) Not ‘hot’::IDFC research,

Entertainment Network - Innovations to the fore; visit note; :: Edelweiss PDF link

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Entertainment Network (ENIL IN, INR 223, Not Rated)

We recently met Mr. Prashant Panday, CEO & ED, Entertainment Network India (ENIL). Radio Mirchi,ENIL’s flagship property, has ~33% market share in the private FM segment. Given the current ad slowdown, ENIL has been focussing on innovative strategies to improve ad yields. The impending Phase III auctions provide an immense opportunity to expand, but ENIL would like to focus on profitability although it has adequate funding in place. Currently, we do not cover this stock.

Buy Entertainment Network Limited; Target :Rs 291 ::ICICI Securities

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C h a l l e  n g  i n g   t i m e  s …
Entertainment Network India Ltd (ENIL) reported its Q3FY12 numbers that
were slightly below our expectations on the topline front but surprised
positively on the bottomline front. The standalone topline stood at | 75.6
crore against our expectation of | 80.1 crore, de-growing 2.5% YoY on
the back of a 0.8% decline in ad revenue. The consolidated topline for the
company stood at | 81.6 crore against our expectation of | 76.8 crore.
However, the company reported a substantial jump in EBITDA margins,
which stood at 41.0% expanding 466 bps YoY on the back of significantly
lower administrative expenses. The consolidated EBITDA margin stood at
40.6%. The company reported standalone PAT of | 18.2 crore growing
45.8% YoY against the PAT of Q3FY11 adjusted for exceptional items.
The consolidated profit stood at | 18.4 crore.
Highlights of the quarter
The radio segment reported an ad revenue decline of 0.8% to | 74.0 crore
primarily due to the absence of high yielding customers who were
replaced by low yielding ones. Blended capacity utilisation, however, saw
an  increase  from  62%  in  Q3FY11  to ~69% in Q3FY12. Standalone
EBITDA margins increased to 41.0% from 36.4% in Q3FY11 primarily due
to lower administrative expenses that declined from | 21.0 crore to | 11.0
crore.
V a l u a t i o n
We have valued the stock on an  SOTP basis, evaluating the radio
business on DCF and event business on EV/sales. Assuming revenue
CAGR of 12.6% over FY11E-20E and terminal growth of 4%, thereon, we
have arrived at a target price of  | 289/share for the radio business. We
have valued the event business at 1.0x FY13 EV/sales to arrive at a
valuation of | 2/share and assigned a target price of | 291. The stock is
currently trading at | 231. Our target price implies an upside potential of
26%. We continue to rate the stock as BUY.

Entertainment Network ENIL: ::Ambit India Access, December 2011

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Entertainment Network
ENIL is a leading radio company in India with over 35% revenue market
share and is one of the few profitable radio players in the industry. We
expect strong revenue growth based on higher advertising rates and
inventory utilization. This coupled with lower cost structure (royalty
structure at 2% of net revenues) would enable margin expansion. ENIL’s
strong cash position would enable it to participate aggressively in the
upcoming phase 3 auction.
Company Background
ENIL operates FM radio broadcasting stations through the brand Radio Mirchi in
32 Indian cities and is headquartered in Mumbai. The company also provides
event management services through its subsidiary Alternate Brand Solutions (India)
Limited. Its promoter, BCCL, is the flagship company of The Times Group, which
has a heritage of over 150 years and is one of India’s leading media groups.
Recent Financial Performance
During 1HFY11, ENIL reported 38% YoY decline in revenues and 2% QoQ growth.
Despite this, due to lower costs the group reported an EBIT of `237mn in 1HFY12
vs `74m in 1HFY11. At end-March 2011, the company had net cash of over
`1.5bn.
Outlook
Increasing demand and growing acceptance of Radio as an advertising medium
would result in a further increases in inventory utilization levels and higher ad
rates. Going forward, improving advertising spend, lower cost structure and
announcement of the phase 3 policy would benefit the company.

Reduce ENIL : Target: Rs.257 :: Kotak Securities

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ENIL
PRICE: RS.254 RECOMMENDATION: REDUCE
TARGET PRICE: RS.257 FY13E P/E: 21.7X
q ENIL reported the following key financials in 2QFY12: Revenues - Rs 692
mn, EBITDA - Rs 184 mn, PAT Rs 90 mn. Results were in line with our expectations.
q Advertising revenues grew 12% in the quarter, an improvement over the
last quarter, which saw 9.7% growth in advertising revenues. Advertising
environment continues to be weak; we see the 12% growth in
2QFY12 as a result of early onset of the festive season. The management
expects 2HFY12 to be challenging in terms of advertising revenues.
q While ENIL continues to the #1 FM radio brand in the country, competitive
intensity has risen meaningfully, especially in the metros (RAM
data). ENIL is thus faced with an environment of low advertising intensity,
faces headwinds of high competition; we believe radio industry on
the whole faces a handicap of inadequate differentiation in the present
policy environment.
q 2Q results, along with the management commentary, and the overall
business environment, indicate that FY12 could be a weaker year for the
company, than we have estimated. We factor in lower revenue growth in
FY12/ FY13, cutting FY12 est by 10%. We cut EPS estimates by 13.4% for
FY12.
q We introduce FY13 estimates, and expect FY13 EPS to come in at Rs 11.7.
Given possible favorable impact of Phase - 3 licensing, we value the stock
aggressively, at 22x PER FY13E. Even so, we believe there is little opportunity
in the stock; ENIL is likely to underperform our media coverage
universe. We maintain REDUCE, with a (revised) price target of Rs 257 (Rs
264 earlier).

Buy Entertainment Network Limited (ENIL) Target :Rs 291 ::ICICI Securities

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B e t t e r   u t i l i s a t i o n ;   c h a l l e n g i n g   t i m e s   a h e a d . . .
Entertainment Network Ltd (ENIL) reported its Q2FY12 numbers, which
were in line with our expectations on the topline front. The consolidated
topline for the company stood at | 70.1 crore against our expectation of |
74.6 crore. YoY comparisons are not prudent for consolidated numbers
as the company has hived off its  outdoor business. The standalone
topline stood at | 69.2 crore, growing 10.1% YoY on the back of 11.9% ad
revenue growth, which can be attributed to higher utilisation. The
blended capacity utilisation stood at 65.3% against 58.0% in Q2FY11.
ENIL reported standalone EBITDA of | 18.4 crore with an EBITDA margin
of 26.5%. The consolidated EBITDA margin stood at 24.8%. The company
reported standalone PAT of | 9.0 crore growing 80.2% YoY. The
consolidated profit stood at | 8.3 crore.
Highlights of the quarter
Ad revenue growth in this quarter was better than the previous quarter in
spite of it being a seasonally weak quarter. The radio business exhibited a
growth of 11.9% YoY in Q2FY12 in a challenging environment. The
blended utilisation level showed an increase from 58.0% in Q2FY11 to ~
65.3% in this quarter. The EBITDA margin in the radio business improved
152 bps to 26.5% from 25.0% in Q2FY11, in spite of higher marketing
expenses in this quarter, due to higher capacity utilisation.
V a l u a t i o n
We have valued the stock on an  SOTP basis, evaluating the radio
business on DCF and event business on EV/sales. Assuming revenue
CAGR of 12.7% over FY11E-FY20E and  terminal growth of 4%, thereon,
we have arrived at a target price of | 288/share for the radio business. We
have valued the event business at 1.0x FY13 EV/sales to arrive at a
valuation of | 2.2/share. The stock is currently trading at | 254. Our target
price implies an upside potential of 15%. We maintain our BUY rating.

Buy Entertainment Network; Target : Rs 296 ::ICICI Securities

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B e l o w   e s t i m a t e s ,   b u t   l o o k s   p r o m i s i n g …
Entertainment Network Limited (ENIL) reported its Q1FY12 numbers that
were below our expectations. The consolidated topline for the company
stood at | 68.7 crore against our expectation of | 82.1 crore, de-growing
40.3% YoY. The standalone topline stood at | 63.2 crore, growing 9.8%
YoY on the back of 7.7% ad revenue growth, which can be attributed to a
higher ad rate charged. The blended  capacity utilisation stood at 55.2%
against 54.8% in Q1FY11. ENIL reported standalone EBITDA of | 18.5
crore  with  an  EBITDA  margin  of  29.19%. The consolidated EBITDA
margin stood at 26.3%. The company reported standalone PAT of | 9.7
crore growing 124.1% YoY. The consolidated profit stood at | 9.3 crore.
ƒ Highlights for the quarter
The quarter was marked by a lower-than-expected topline. The radio
business exhibited a low growth of 9.8% YoY in Q1FY12 as most
companies that overspent on ads in Q4FY11 owing to the World
Cup, chose to cut their ad spend in this quarter. The blended
utilisation level increased marginally from 54.8% in Q1FY11 to
approximately 55.2% in this quarter. The company registered an
average yield of about | 9347 per 10 second slot across the network.
The EBITDA margin in the radio business increased to 29.2% from
25.2% in Q1FY11 primarily due to stringent cost cutting measures
taken by the company.
V a l u a t i o n
We have valued ENIL on an SOTP basis, evaluating the radio business on
DCF and event business on EV/sales. Assuming revenue CAGR of 12.3%
over FY11E–FY20E and terminal growth of 4%, thereon, we have arrived
at a target price of | 286/share for the radio business. We have valued the
event business at 1x FY13 EV/sales to arrive at a valuation of | 10.1/share.
The stock is currently trading at | 257. Our target price implies an upside
potential of 15%. We continue to rate the stock as BUY

Entertainment Network - Strong volumes drive earnings in seasonally weak Q1 :JPMorgan

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Entertainment Network (India)
Limited Overweight
ENIL.NS, ENIL IN
Strong volumes drive earnings in seasonally weak Q1


ENIL reported strong Q1 earnings driven by higher volumes and better
pricing. Management expects further improvements in subsequent quarters as
demand picks up post a seasonally weak 1Q. Remain OW with Mar-12 PT of
Rs335.
 Strong 1Q performance: ENIL reported strong performance in Q1 driven
by better inventory utilisation and pricing. Inventory utilisation in Tier I
cities improved marginally, though Tier II cities fared much better on
volumes. Pricing (+3%), on the other hand, was driven primarily by hikes in
Tier I cities. Management expects this trend to continue with Tier II cities
driving volumes, while Tier I cities are likely to see better pricing on tight
inventory.
 Phase III time line. Management noted that Phase III guidelines are
expected in the next six months (by end of CY2011) with the bidding
process to take another 1-2 months (end FY12). Management expects
another 6-8 months to ramp up the operations in Tier III cities and noted
that the impact of Phase III should be visible only by Q4FY13. We are not
yet factoring Phase III scenario into our estimates and await final regulatory
guidelines on the same.
 Q1FY12 results highlights. Revenues increased 8% YoY driven by
volumes (+5% YoY) and pricing (+3% YoY). EBITDA margins improved
470bps YoY driven by lower royalties and marketing expenses. Net profits
increased 124% YoY, buoyed by higher non-operating income (on
investments made from higher cash balance) and lower tax rates.
 Well-positioned to benefit from Phase III, remain OW. We believe that
ENIL with its leading position in the private FM radio industry, strong brand
and solid balance sheet is well-positioned to benefit from the roll-out of
Phase III licenses and other regulatory changes (networking, multiple
stations, etc). Remain OW with Mar-12 PT of Rs335 based on 22x FY13E
P/E. Key risks include aggressive bid for Phase III licences, rise in
competitive intensity, entry into non-core segments and adverse legislation.

KIFS Result update of UBI-DB Corp-Enil-Allahabad-Axis-Colgate

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KIFS Result update of:

UNION BANK

OVERVIEW

With a pan India reach with 3015 branches and 2634 ATM’s, Union Bank is also one of the most technologically advanced public sector banks. The bank has currently more than 27000 employees and is implementing a HR restructuring. The net profit per employee has grown almost 3 times since FY06 from Rs 2.66 cr to Rs 7.5 cr in FY11. With the implementation of CBS for all its branches in FY 08, gross profit per branch has increased almost 2 times from Rs 70 lakhs in FY06 to Rs 1.43 cr in FY 11.

Key highlights:

· Total income grew by 31% Y-o-Y to Rs.5400 cr. v/s Rs. 4121 cr in June-10

· Operating Profit grew by 12% Y-o-Y to Rs. 1166 cr.  v/s Rs. 1044 cr in June-10

· Net profit fell by a whopping 23% Y-o-Y to Rs. 464 cr. v/s Rs. 601 cr in June-10

· Gross NPA’s grew by 38 bps Y-o-Y to 2.57%  v/s 2.19% in June-10

· Net NPA’s grew by 38 bps Y-o-Y to 1.32%  v/s 0.94% in June-10

DB CORP

OVERVIEW

DB Corp is India’s largest print media company and home to flagship news papers Dainik Bhaskar, Divya Bhaskar and DNA (English) among others. It also operates FM radio stations in 17 cities under the brand name My FM. DB Corp Ltd. is the largest print media group amongst national dailies, with 18.1 million readers as revealed by the IRS survey of Q1 2011. Dainik Bhaskar is the No. 1 Newspaper of urban India in Average Issue Readership (AIR). DB Corp is a leader in Madhya Pradesh, Chattisgarh, Chandigarh, Haryana, Punjab, Rajasthan and Gujarat, its core area of operations.

Key highlights:

· Total income grew by 23% Y-o-Y to Rs. 353 cr. v/s Rs. 288 cr in June-10

· Operating Profit fell by 12% Y-o-Y to Rs. 106 cr.  v/s Rs. 120 cr in June-10

· OPM fell by 1161 bps Y-o-Y to 30.07%  v/s 41.68% in June-10

· Net profit fell by 14% Y-o-Y to Rs. 63 cr.  v/s Rs. 73 cr in June-10

· NPM fell by 753 bps Y-o-Y to 17.98% v/s 25.51% in June-10

· Raw Material Cost increased sharply by 44% Y-o-Y

ENIL

OVERVIEW

ENIL Operates in the radio broadcasting segment, out-of-home media segment and experiential marketing segment. With 'Radio Mirchi' being the No.1 Radio brand in the private FM space it has network across 14 states with 32 stations and more than 41 million listeners across all its stations. The Govt. has approved phase III licensing for FM stations in India. Phase III will open up expansion potential for FM radio to additional 227 towns boosting growth for radio advertising. ENIL seems well placed to take advantage of opening up of this new market.

Key highlights:

· Total income grew by 10% Y-o-Y to Rs.63 cr. v/s Rs. 58 cr in June-10

· Operating Profit grew by 73% Y-o-Y to Rs. 16 cr.  v/s Rs. 9 cr in June-10

· OPM grew by 947 bps Y-o-Y to 25.92%  v/s 16.45% in June-10

· Net profit grew by 124% Y-o-Y to Rs. 10 cr.  v/s Rs. 4 cr in June-10

· NPM grew by 778 bps Y-o-Y to 15.27%  v/s 7.49% in June-10

ALLAHABAD BANK

OVERVIEW

Having 2415 branches and 200 ATM’s with major concentration of branches in West Bengal, Bihar and UP, Allahabad Bank plans to add another 155 branches and 500 ATM’s by FY 12. The bank will be opening up these new branches in new CASA rich regions of Southern and Western India. The bank also plans to increase the fee based component of revenues by launching new products and services for NRI clients and bullion trading. Allahabad bank enjoys a higher than industry average NIM of 3.38% due to low cost deposits with a CASA ratio of over 33%.

Key highlights:

· Total income grew by 42% Y-o-Y to Rs.3836 cr. v/s Rs. 2702 cr in June-10

· Operating Profit grew by 26% Y-o-Y to Rs. 890 cr. v/s Rs. 705 cr in June-10

· Net profit grew by 20% Y-o-Y to Rs. 418 cr.  v/s Rs. 347 cr in June-10

· Gross NPA’s grew by 12 bps Y-o-Y to 1.62%  v/s 1.50% in June-10

· Net NPA’s grew by 19 bps Y-o-Y to 0.60%  v/s 0.41% in June-10

AXIS BANK

OVERVIEW

With a strong branch network expansion CAGR of 33% from 2004-11, Axis Bank is on a tipping point to capture a large part of the Indian financial services market. NII and fee based income for the bank has grown at a CAGR of 45% and 44% respectively in the last five years. Axis bank has over 1390 branches and extension counters and over 6270 ATM’s. With the use of high end technology, Axis Bank has been to service large corporate clients for cash management services. Axis Bank is also a dominant player in placement and syndication of debt issues. New frontiers are expected to open up and push the savings deposit CAGR of 35% achieved in last 5 years higher.

Key highlights:

· Total income grew by 40% Y-o-Y to Rs.6049 cr. v/s Rs. 4326 cr in June-10

· Operating Profit grew by 7% Y-o-Y to Rs. 1558 cr.  v/s Rs. 1450 cr in June-10

· Net profit grew by 27% Y-o-Y to Rs. 942 cr.  v/s Rs. 742 cr in June-10

· Gross NPA’s fell by 7 bps Y-o-Y to 1.06%  v/s 1.13% in June-10

· Net NPA’s fell by 4 bps Y-o-Y to 0.31%  v/s 0.35% in June-10

COLGATE PALMOLIVE

OVERVIEW

Colgate is a leading company in oral care– toothpaste segment. It has manufacturing facilities at Aurangabad (Maharashtra), Goa and Baddi (Himachal Pradesh). The company sells its products In around 200 countries and has global brands like "Colgate", "Mennen", "Palmolive", "Ajax", "Softsoap" and "Hill’s Pet Nutrition" in its stable. The company caters approximate 53% market share in domestic oral care market.

Key highlights:

· Total income grew by 14% Y-o-Y to Rs. 629 cr  v/s Rs. 550 cr in June-10

· Operating Profit fell by 11% Y-o-Y to Rs. 148 cr. v/s Rs. 165 cr. in    Jun-10

· OPM fell by 663 bps   Y-o-Y to 23.44 % v/s 30.07 % in June-10

· Net profit fell by 18% Y-o-Y to Rs. 100 cr.  v/s Rs. 122 cr. in June-10

· NPM fell by 623 bps       Y-o-Y to 15.96 % v/s 22.19 % in June-10

JPMorgan: Phase III license auction approved, potential upside for ENIL

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Phase III license auction approved, potential upside
for ENIL


The govt. has approved phase III licensing for FM stations in India. Phase
III will open up expansion potential for FM radio to additional 227 towns
boosting growth for radio advertising.
 Bids to be invited for 839 new frequencies spread over 227
cities. Phase III licensing is likely to invite bids for 839 new channels
over 227 cities. Although, auctions may be 4-6 months away (with
guidelines and other procedures being finalised), we believe this paves
the way for enhancing penetration of FM radio to Tier II and Tier III
cities. This should provide a strong filip to radio advertising growth
 Bidding process through e-auction: The information and broadcasting
ministry has indicated that the bidding for Phase III licenses would be
through an e-auction process. An independent agency will be appointed
to set up the guidelines for the-auction. We believe that the e-auction
process could likely result in aggressive bidding. ENIL has demonstrated
financial discipline in their bidding during Phase II and management has
indicated an 18% IRR threshold when they bid for new stations. ENIL
has a strong balance sheet with net cash of Rs232MM (FY11) and we
believe would be one of the frontrunners in the bidding.
 Other expected regulatory changes. Phase III is expected to be
accompanied by regulatory changes including :1) Multiple frequencies in
a city, 2) Networking of stations, 3) Reduction of lock-in period for
bidders from 5 years to 3 years, 4) Increase in FDI from current 20% to
26% and 5) Allowing private players to broadcast news and current
affairs. We believe these changes would provide significant operating
leverage benefits to leading radio and likely improve profitability for the
radio industry, given largely fixed cost operating structure
 We see significant potential upside to our FY13E-FY14E estimates:
While it is difficult to gauge the impact of phase III on ENIL’s
profitability at this juncture (much will depend on bid prices as well as
regulatory changes), we see potential for significant margin improvement
for ENIL going forward. These benefits are likely to accrue from sharing
of fixed costs between stations based on networking, as well as leverage
from multiple frequencies in a single city. In addition, we expect industry
consolidation as smaller players become eligible to sell-out; we think
ENIL could be a potential buyer. Reiterate OW rating. Key risks include
aggressive bidding for Phase III licences, rising competitive intensity,
entry into non-core segments and adverse legislation.

Buy ENIL: Radio numbers encouraging… Target :Rs 254: ICICI Securities

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ENIL: Radio numbers encouraging…
ENIL’s standalone numbers were in line with our expectation with
topline at | 74.57 crore, growing 17.7% YoY. On a consolidated basis,
the company reported a topline of | 142.9 crore against our expectation
of | 110 crore, partly due to inclusion of OOH business financials till
December 29, 2011 against our expectation of November 30, 2011.
Standalone EBITDA stood at | 28.2 crore while the margin was 36.4%,
against 33.2% in Q3FY10, aided by a variable royalty regime. ENIL
reported standalone PAT of | 24.9 crore that included | 12.4 crore from
sale of its stake in TIM to BCCL. However, on a consolidated level, the
company reported a net loss of | 5.2 crore due to a loss of | 17.9 crore
on account of sale of OOH business to BCCL (carrying cost was higher
in consolidated books, in line with stake sale to Goldman and Lehman).

Buy ENIL 3QFY11 review- Target Rs 265; Kotak Securities

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ENTERTAINMENT NETWORK INDIA LTD (ENIL)
RECOMMENDATION: BUY
TARGET PRICE: RS.265
FY12E P/E: 17.6X
q ENIL reported strong set of results for 3QFY11. Revenues came in at Rs
775 mn (+22%, y/y), EBITDA at Rs 282 mn (+33%, y/y), and adjusted PAT
at Rs 126mn (+19%, y/y) (standalone financials). Revenues and EBITDA are
well above our estimates. Adjusted PAT came in below our estimates on
account of high deferred tax charge.
q Strong results followed from: a/ improved advertising environment, b/
lower production expenses following the order of the copyright board
that has reduced the royalty payments. Advertising revenues growth was
amply helped by improved pricing in larger cities (11%, q/q), and improved
capacity utilization in the smaller cities. The company has continued
to book lower expenses on production, as a result of an order of the
copyright board. Reported PAT (standalone) has been amply helped by
profits booked on account of sale of OOH division (exceptional items),
while adjusted PAT has come in lower than our expectations, as the company
has taken a deferred tax charge of Rs 78.4mn.
q We make changes to our FY11/ FY12 estimates to incorporate 3QFY11
results as well as higher growth in profits that the results indicate. Our
FY11E/ FY12E EPS is raised to Rs 10.3(+58%)/ Rs12.1 (+1%). Adjusted EPS
(FY11E) is revised upward by 18%.
q ENIL management sounded positive on the announcement of Phase - 3 of
FM radio licensing. The management expects a decision from the government
regarding auctions in the next 3-4 weeks. Auctions themselves
could be held in 3-4 months, and new stations could get operational in
the next 12-18 months.
q The sale of OOH division has brought in ample cash in ENIL's balance
sheet. The company currently has Rs 940mn net cash position, which
would be helpful in funding expansion for the Phase - 3 licenses.
q Improved profitability, continued strength in listenership, stronger cash
position, and exposure to positive regulatory impetus, place ENIL in a
sweet spot among media companies. We are bullish on ENIL and value
the stock at Rs 265, based on 22xPER FY12E EPS. On account of decline in
the stock price since our last update (due, we think to market decline),
we find the risk - reward more favourable on ENIL and upgrade the stock
to BUY.

ENIL Q3FY11: Phase III – key monitorable! : IDFC Securities

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Key highlights of Q3FY11 results and post result conference call
• ENIL has reported its Q3FY11 results. Standalone revenues have grown by 22% at Rs775m (estimates of Rs743m), EBITDA
of Rs282m (estimates of Rs250m) and operational PAT grew by 16.5% at Rs129m (estimates of Rs147m).
• The sale of the OOH business to BCCL was completed in December 2010 and hence financials from the OOH business
are included in the consolidated results of Q3FY11. Also, reported PAT of standalone financials include extraordinary
income of Rs120m (post tax) on account of this sale.
• Consolidated revenues stood at Rs1.46bn, EBITDA of Rs363m and operational PAT of Rs127m. Sale of the OOH
business resulted in an exceptional loss of Rs180m for the consolidated operations (carrying value higher in
consolidated books on account of purchase of stake by Lehman and Goldman at an entity value of ~Rs10bn). Thus,
consolidated operations reported a net loss of Rs52m.
• With regards the radio business, the 10 legacy stations have contributed Rs560m in revenues (72% of radio revenues)
with occupancies at over 80-85%. EBITDA for legacy stations stood at Rs218m for the quarter. With respect to new
stations, occupancies stood at 54%.
• During the quarter ENIL had an average yield of Rs10,000 per 10 second slot across the network, which is 15% up on a
QoQ basis. ENIL has taken price hikes in the range of 5-20% in August 2010, the full impact of which is being seen
from this quarter onwards.
• With respect to the private treaty deals which ENIL enters into, during the quarter income to the tune of Rs45m and
provisions to the tune of Rs36.9m has been made during the quarter. ENIL would write back the amount with respect
to the private treaty deals as and when BCCL realizes the amount from its investments. ENIL is expected to account
for ~4% of its radio revenues towards private treaty deals.
• In August 2010, the Copyright Board resolved the long pending music royalty issue. Payment of music royalty by
radio operators to music companies has been changed from a fixed fee agreement to a revenue sharing agreement.
The effective cost is now estimated to be at 2% of net revenues against the earlier implied cost of 7% of revenues.

JP Morgan: ENIL- Tuning in: Entertainment Network (India) Limited

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Entertainment Network (India) Limited 
Initiation as Overweight
ENIL.NS, ENIL IN
Tuning in 


• Initiate with Overweight, price target of Rs290: Our PT implies a
potential upside of 27% from current levels. ENIL is the leading FM
radio operator in India, operating 32 stations across India under the
‘Radio Mirchi’ brand. We believe  it is well positioned to benefit from
rising share of radio advertising in the Indian advertising market.

Entertainment Network — Ruling The Airwaves: Ambit

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INITIATING COVERAGE
Entertainment Network — Ruling The Airwaves

Initiating coverage with a BUY rating
We initiate coverage on ENIL with a BUY. We value ENIL on a SOTP basis with a TP of Rs275 (Radio Mirchi: DCF valuation Rs260/sh plus Event Management at 1yr fwd1x EV/sales Rs15/sh). This indicates an upside of 25% from current levels. In our view, improving ad spend, changes in the royalty structure and announcement of phase 3 policy will transform business dynamics of the radio industry. ENIL, the leading player, is expected to benefit the most.

Media Buzz ::Radio – Tune In:: Citi

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Media Buzz
Radio – Tune In
 Listen In — The radio market in India is in its infancy, at ~US$200m, but growing
faster than the overall ad market in the last decade, post (partial) deregulation.
We think there is scope for further growth – radio currently constitutes ~4% of the
ad pie and could move closer to the global average of 7-8%. Increasing mobile
phone penetration, emergence of local advertising and expansion into smaller
cities are accelerating industry growth.